Request for Proposals: Engineering Services for Municipal Broadband

City Manager’s Office City of San Pablo, California

Submission Deadline and Location: March 28, 2016 - 5:00pm City Clerk’s Office 13831 San Pablo Ave, Bldg 1 San Pablo, CA 94806

Or via email: [email protected]

Request for Proposals: Engineering Services for Municipal Broadband Contact Person: Charles Ching Email Address: [email protected] Phone: 510-215-3004 Address: 13831 San Pablo Avenue San Pablo, California 94806

Optional Pre-Proposal Conference Call Date: March 7, 2016 10:00 AM PST Conference Information: Phone Number: (408) 650-3123 Access Code: 237-010-013

Proposal Requirements: Submit three print copies and one electronic copy

PROPOSALS DUE: March 28, 2016 5:00 PM Pacific

Target Selection Date: April 18, 2016

City of San Pablo 1 Request for Proposals for Municipal Broadband Engineering Table of Contents

Table of Contents 2

About San Pablo 3

RFP Introduction 4

Background 4

Project Description 5

Scope of Services 8

Consultant Selection 11

Submittal Requirements 13

Contact Information 13

Submission Deadline 14

Anticipated Request for Proposal Timeline 14

Appendix

Broadband Feasibility Report

Form of City of San Pablo Consultant Contract

City of San Pablo 2 Request for Proposals for Municipal Broadband Engineering About San Pablo

San Pablo is located in West Contra Costa County off Interstate 80, minutes away from the Bay Area cultural centers of Berkeley, Oakland and San Francisco. Interstate 80 is the principal arterial route between the Bay Area and Sacramento. The City of San Pablo is nestled between the cities of Pinole and Richmond and by the neighboring cities of El Cerrito and Hercules. Historically one of the oldest Spanish settlements in the region, San Pablo has become a thriving residential and business community with a population of about 32,000 in an area of approximately two and one- half square miles.

The 2010 census table below describes the race demographics for the city of San Pablo:

Demographics

Hispanic or Latino (of any race) 16,462 56.5%

Not Hispanic or Latino 12,677 43.5%

White 10,481 36.0%

Black or African American 5,053 17.3%

American Indian and Alaska Native 523 1.8%

Asian 4,800 16.5%

Native Hawaiian and Other Pacific Islander 308 1.1%

Some other race 9,686 33.2%

Two or more races 1,567 5.4%

San Pablo is located less than 40 minutes away from international airports in Oakland and San Francisco. Access to the Bay Area Rapid Transit (BART) system and Amtrak passenger train

City of San Pablo 3 Request for Proposals for Municipal Broadband Engineering service are close by. AC Transit bus line service includes San Pablo in its route from Fremont to Pinole. Containerized shipping, ports and railway access are located in Richmond and Oakland. Rumrill Boulevard serves as a designated truck route to the Richmond Parkway.

San Pablo's diverse community, affordability, and access to the entire Bay Area region are advantages that are found in this "City of New Directions."

RFP Introduction The City of San Pablo City Manager’s Office is planning the deployment of an open access fiber to the premises network. The purpose of this request for proposals is to solicit firms interested in providing engineering services, construction bid preparation and management, construction inspection services and other related engineering tasks.

Within this document, specific information regarding the project will be provided (i.e. background, project description, scope of services, consultant selection, ).

Background The City of San Pablo (“City”) believes access to broadband:  Is key to diversifying the local economy, which is essential if the City is to remain fiscally sustainable in the long-term; thus…

Is an essential component of economic development, supporting existing San Pablo businesses, attracting new businesses to San Pablo, attracting firms and organizations involved in biomedical sciences, telemedicine, and other entities involved in the growing medical services industry, creating new work opportunities;

 Is an equity issue (mitigates the digital divide by providing equal access to cutting-edge technologies, regardless of Socio-economic status);  Supports education and workforce skill development;  Contributes to public safety;  Reduces negative impacts on the environment; and  May encourage more owner-occupied housing.

City of San Pablo 4 Request for Proposals for Municipal Broadband Engineering The City commissioned a municipal broadband feasibility report in 2015 (included in the appendix for reference). The report found that while incumbent providers exist in the City, they do not share the public policy objectives of the City. Therefore, in order to control public policy outcomes, the City will continue to investigate the implementation of an open access fiber to the premises network throughout the City.

One of the next steps in furthering the City’s broadband development objectives is to complete network engineering for a ubiquitous deployment of a fiber to the premises network. Engineering will be completed in two phases: core rings and service areas.

Project Description The City’s vision is to deploy a ubiquitous fiber to the premises network. The intent is to complete this work in two primary phases: core rings and service areas. The City perceives benefit in completing all of the engineering so that service area engineering informs core ring design and vice-versa. The City’s intended process is to design the network, build the core rings, begin providing services to businesses along the core rings, stabilize the network and operations, and finally to stagger the construction of the service areas. However, the schedule is important and there may be a need to complete core ring designs and begin construction on core rings before the service area designs are complete.

Included in the appendix is the first version of engineering design guidelines. The Engineer will provide feedback on these design guidelines and help improve them based on the Engineer’s experience, the specific needs of the San Pablo project, CEQA consultation, etc. Potential proposers will note that no aerial infrastructure is included in the design guidelines. The City intends for all municipal broadband infrastructure to be placed underground.

The feasibility study suggests a core ring layout as depicted in pink below:

City of San Pablo 5 Request for Proposals for Municipal Broadband Engineering

This is a suggestion only and the Engineer will be expected to select routes based on construction cost efficiency, compliance with design guidelines, the ability to secure rights of way, the ability to secure community cabinet locations, and other factors. As proposed, the core rings comprise 60,092 feet.

The core rings may serve businesses and other entities along their routes. The core rings will also serve service areas for the planned ubiquitous fiber to the premises network. The study proposed six service areas:

City of San Pablo 6 Request for Proposals for Municipal Broadband Engineering

Like with the core rings, these proposed service area boundaries are only suggestions. The Engineer will be responsible for creating service areas that comply with design guidelines and meet other parameters.

Each service area will be served from a remote node or community cabinet attached to a data center on two or more diverse routes on the core ring. Community cabinet locations have not been secured. It will be the responsibility of the Engineer to lead the effort to secure community cabinet locations before engineering the core rings or establishing service areas.

In each service area, a dedicated fiber will connect each address to the community cabinet. These running lines comprise the access level infrastructure.

City of San Pablo 7 Request for Proposals for Municipal Broadband Engineering

As imagined in the feasibility report, the project consists of about 155,500 feet of running line infrastructure for a total estimated engineered footage of 215,598 feet (almost 41 miles).

The network will be designed with dedicated fiber to each address from the nearest aggregation point (community cabinet) to support an active Ethernet architecture.

Scope of Services The City desires to contract with a qualified engineering firm that will serve as the prime consultant for all related tasks outlined in this RFP. This section provides descriptions of the work to be completed by the prime consultant and/or its subcontracting partners.

1. Equipment Engineering  Material and equipment specifications  Power requirements including backup and redundant systems  Space and environmental requirements for equipment  Data center and community cabinet site selection and equipment design  Network management systems  Installation drawings and diagrams

City of San Pablo 8 Request for Proposals for Municipal Broadband Engineering 2. Project Design Consultant shall complete detailed designs for the project. Project design shall include the following:  Develop inside plant and outside plant design standards to include design guidelines and typical diagrams; design standards must take into consideration assumptions made in the feasibility study and should be coordinated with the City’s broadband consultant, OHIvey, LLC  Use information from City’s CEQA consultant to inform the design; provide City’s CEQA consultant design information needed for completion of the CEQA process  Engineering processes will include o Creating base maps which include parcels/addresses and other information needed to design the network o Providing detailed underground fiber routing design in ESRI format using any available existing spatial information as well as data collected in the field necessary to provide a fully constructible plan o Design may incorporate existing assets from incumbent providers and City o Providing quality control inspection documents to ensure design and construction standards are maintained o Providing regular progress updates o Undertaking outside plant staking as needed to validate design, confirm existing utilities, and collect necessary information for permitting agencies o Assist in Right of way acquisition o Permitting

3. Meetings and Coordination Meetings with the City for design and local jurisdiction review processes and coordination with selected construction contractor and other required entities as needed are included in this task. Minimum required meetings include status meetings associated with the following milestones:  Kickoff  Base maps complete and outside plant staking begun  Core ring design complete

City of San Pablo 9 Request for Proposals for Municipal Broadband Engineering  First service area design complete  Design complete Engineer will provide City both written and oral detailed weekly status updates.

4. Construction Documents Engineer shall provide all construction documents needed for a fully constructible project. Construction documents will be delivered electronically and in print. Construction documents include (at a minimum):  Bill of materials and labor analysis  Detailed design plans in GIS and PDF format  Construction specifications to be shown on drawings  Approved permit drawings  Splicing diagram and fiber allocation tables

5. Bid Packages  Engineer will assist in developing the invitation for bids for construction contractors. Engineer will assist in creating construction bid documents including but not limited to a bid schedule with unit price breakout, construction plans, and bill of materials. During the construction bid period, Engineer is required to be in attendance at the pre-bid meeting and to answer questions as needed.  Engineer will assist in developing the request for proposals for electronics and inside plant materials.

6. Construction Management and Quality Control Services (Inspection) During the construction period the Engineer will provide the following services:  Coordinating, scheduling, and attending pre-construction meetings with relevant entities  Inspection services to ensure quality of construction  Field change and change order review  Construction contractor invoice review and approval assistance  Resolve utility conflicts as needed during construction  Complete quality control plan to include schedule, process, and completion checklist

City of San Pablo 10 Request for Proposals for Municipal Broadband Engineering  Complete “red-lines” and develop “as-built” diagrams; update GIS information to reflect “as-built” network

Consultant Selection

The successful Consultant will be prohibited from having any conflict of interest regarding the construction contractors.

A review committee will review all proposals received by the City. Proposers may be asked to present before a formal selection Committee. Proposals will be evaluated on the basis of the experience and performance capability of the Engineering team and cost proposals. All proposers must be a licensed Professional Engineer and will be evaluated on the basis of the following criteria:

Criteria Experience designing fiber to the premises solutions in urban environments 20% Experience preparing design specifications 20% Experience preparing bid documents and managing construction bids 10% Experience inspecting construction work and tracking construction progress 10% Proposed project methodologies to include processes and tools 10% References 10% Cost proposal 20%

Submittal Requirements Three printed copies and one electronic copy of a comprehensive proposal shall be submitted to the City Manager’s Office for consideration. A comprehensive proposal shall include all of the required elements below.

City of San Pablo 11 Request for Proposals for Municipal Broadband Engineering 1. About the Engineer Provide information about your company and the team you will use to complete this work if selected. Include, at a minimum:  Company background  Primary point of contact  Indicate any subcontractors you intend to use  List key staff you intend to assign and provide background information  Indicate key staff licensed as professional engineers in California

2. Experience Provide information about your experience. Include, at a minimum:

 Experience designing fiber to the premises solutions in urban environments  Experience preparing design specifications  Experience preparing bid documents and managing construction bids  Experience inspecting construction work and tracking construction progress

3. References Provide at least three professional references the City can contact.

4. Project Methodologies and Processes Describe the methodologies and procedures you propose for each of the scope areas described in this RFP. Include, at a minimum:  A description of your understanding of the scope item  A proposed timeline  Key risks regarding each scope item with proposed avoidance or mitigation measures

5. Cost Proposal The cost proposal should include unit costing as appropriate for proposer’s methodologies and processes for each of the scope items. Unit costing may be by work unit, in time and materials, or in some other format as appropriate for the proposer. Proposers should estimate the number of units required for each unit type for each scope item. Proposers may use a format similar to the following (reformatting and adding rows as needed): Unit Unit Type Unit Cost Estimated Extended Notes Description (each, per Units Cost hour, etc.) Equipment Engineering

Equipment Engineering Total: Project Design

City of San Pablo 12 Request for Proposals for Municipal Broadband Engineering

Project Design Total: Meetings and Coordination

Meetings and Coordination Total: Construction Documents

Construction Documents Total: Bid Packages

Bid Packages Total: Construction Management and Quality Control Services (Inspection)

Construction Management and Quality Control Services (Inspection) Total: Project Total:

Submittal Requirements Successful proposers shall be required to execute the attached form of Consulting Services Agreement. Any exceptions to the Agreement, including indemnity and insurance must be set forth in the Proposal or the Consultant shall be deemed to accept the terms of the attached Agreement. Contact Information Questions regarding this RFP should be directed to: Charles Ching, Assistant to the City Manager City of San Pablo Tel: (510) 215-3004 E-mail: [email protected]

For further information regarding the City please visit our website at: www.sanpablo.ca.gov

City of San Pablo 13 Request for Proposals for Municipal Broadband Engineering Submission Deadline To be eligible for consideration, three printed sets and one electronic version of a complete RFP submission packet must be delivered to the City offices by 5:00pm, on March 28, 2016. All packets shall be sent to:

Office of the City Clerk City of San Pablo 13831 San Pablo Ave. Bldg. #1 San Pablo, CA 94806

Anticipated Request for Proposal Timeline

February 22, 2016 RFP released March 7, 2016 Non-mandatory pre-proposal conference 10 AM, PST Phone Number: (408) 650-3123 Access Code: 237-010-013 March 28, 2016 Deadline to submit Proposals Week of March 28, 2016 Consultant team interviews, reference check, fee negotiation, and staff recommendation on consultant selection April 18, 2016 Award of contract by the City Council and commencement of the design process May 27, 2016 Target core ring design complete August 12, 2016 Target design complete August 1, 2016 Target core ring construction start October 28, 2016 Target core ring construction complete January 2, 2017 Target service area construction start June 16, 2017 Target service area construction complete

City of San Pablo 14 Request for Proposals for Municipal Broadband Engineering

Appendix

City of San Pablo 15 Request for Proposals for Municipal Broadband Engineering

Broadband Feasibility Report

Attached

City of San Pablo 16 Request for Proposals for Municipal Broadband Engineering SAN PABLO BROADBAND PLANNING October 14, 2015

10/14/2015

OHIVEY SAN PABLO BROADBAND PLANNING

OHIvey, LLC PO Box 1356 Sandy, Utah 84091

Phone: (801) 599-4866 Email: [email protected]

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October 14, 2015 SAN PABLO BROADBAND PLANNING

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SAN PABLO BROADBAND PLANNING October 14, 2015

Overview The City of San Pablo engaged to conduct a municipal broadband study with the primary purposes of establishing public policy, identifying a broadband development model to satisfy the City’s policy objectives, and to determine the initial feasibility of implementing a solution. This report offers an executive summary of the findings and proposes recommendations for next steps.

We recommend that San Pablo move forward with design and engineering followed by a re-evaluation of feasibility based upon more accurate cost-analysis and a completed CEQA study of a public-private partnership open access fiber-to-the-premises municipal broadband solution. Completing design and engineering will provide information that will allow for refined cost and schedule estimates and a better evaluation of the feasibility of the project.

The present study shows, clearly, that a public-private partnership open access fiber to the premises solution is the best mechanism to meet the City’s broadband development public policy objectives.

Based upon high level design and feasibility assumptions, capital costs for the project are estimated to be between $13.5 and $15 million depending on construction methodologies (in particular microtrenching vs. directional boring). Design and engineering and re-evaluation of feasibility can be complete as early as August 2016. Core rings and service for business districts could be complete as early as October of 2016. Universal availability (throughout San Pablo) would likely be complete by December of 2017.

The present feasibility study focused upon 11 work packages:

1. Broadband Deployment and Public Policy 2. Current State Evaluation 3. Potential Models and Available Technology 4. Comparison of Wholesale vs. Retail Models 5. Retail Market Potential 6. Competition and Potential Partnerships 7. Future Broadband Trends 8. Feasibility Design 9. 10-Year Deployment and Operations Plan with Budget and Staffing 10. Potential Roadblocks/Impediments 11. Potential Legal Issues

The body of this report discusses each of these work packages in appropriate detail. The body of this report also documents the methodologies we employed that led to the conclusion that a public-private

Overview | OHIvey a

October 14, 2015 SAN PABLO BROADBAND PLANNING partnership open access fiber to the premises solution is the best way for San Pablo to meet its broadband development public policy objectives and that the solution is, indeed, feasible.

Scope We recommend that the City use a PHASED approach to develop a ubiquitously available public-private partnership open access fiber to the premises network. This recommendation includes four concepts that merit brief definition here; they are:

 Ubiquitously Available Anyone at any address can choose to subscribe, if they care to. That is, the network is available throughout San Pablo.

 Public-Private Partnership A public-private partnership teams public agencies with private enterprise; thus, allowing the project to benefit from the strengths of both the public and private sectors.

 Open Access An open access network allows multiple service providers to compete across a shared physical infrastructure. For example, service providers (firms/organizations wanting to market their wares and services through the internet) will be able to reach their respective geographic markets not only through the San Pablo Municipal Broadband network, but through other communities throughout the nation which have developed a similar open-access broadband network.

 Fiber to the premises Fiber simply provides the best bandwidth of any delivery technology. Extending fiber all the way to the premises (typically referred to as “The Last Mile”) ensures the network is as future- proofed as possible.

To better understand this scope, we need to take a look at the City’s broadband development public policy objectives, review the current state of broadband in the City for applicability towards meeting these objectives, and, if the current state is found lacking, identify appropriate technologies and a business model that can address its shortcomings.

Broadband Development Public Policy Objectives San Pablo City officials are committed to providing local businesses and residents alike, with full access to broadband through municipal fiber optics:

 Having access to the Internet through fiber optics is key to diversifying the local economy, which is essential if the City is to remain fiscally sustainable in the long-term (e.g., create new jobs for local residents by attracting new businesses to San Pablo). More specifically, Municipal

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Broadband is an essential component of economic development, supporting existing San Pablo businesses, attracting new businesses to San Pablo, attracting firms and organizations involved in biomedical sciences, tele-medicine, and other entities involved in the growing medical services industry, creating new work opportunities (jobs) for San Pablo residents;  Introducing Municipal Broadband to San Pablo is an equity issue; it will mitigate the digital divide by providing equal access to cutting-edge technologies, regardless of Socio-economic status;  Will support education and workforce skill development;  Will enhance public safety (e.g., video surveillance);  Will enhance healthcare for San Pablo residents; in particular, make possible tele-medicine;  Will reduce negative impacts on the environment; and,  May encourage more owner-occupied housing.

Thus, it is the City’s intent to identify and engage in an appropriate broadband development strategy to further the above policy objectives.

Current State In assessing the current state of broadband in a given community, we typically examine three driving factors:

 Available municipally-owned assets;  Middle-mile options and quality; and,  Last mile options and quality.

In the City of San Pablo, available municipally-owned assets are limited. Existing telecommunications assets currently supporting video surveillance and other public safety functions have some limited utility toward broader broadband development.

Middle mile capacity and options in the area are significant. For example, Level (3), AT&T, Comcast, and others have enterprise level middle-mile fiber in or near to the City.

In the last mile, San Pablo has two significant providers – Comcast and AT&T.

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Figure 1: Comcast and AT&T Market Shares

Both AT&T and Comcast offer reasonably-priced solutions.

Package Speed Promo Price Regular Price Regular $/Mbps Express 1.5/1 Mbps $25 Pro 3/1 Mbps $30 $46 $15.33 Elite 6/1 Mbps $35 $51 $8.50 Max 12/1.5 Mbps $40 $56 $4.66 Max Plus 18/1.5 Mbps $45 $61 $3.38 Max Turbo 24/3 Mbps $55 $71 $2.95 Power 45/6 Mbps $65 $81 $1.80 Power 75 75/8 $75 Table 1: AT&T Packages and Pricing

AT&T has additional services available for business customers in some areas of the City.

Package Speed Promo Price Regular Price Regular $/Mbps Economy Plus 3/.768 Mbps $39.95 $39.95 $13.31 Performance Starter 6/1 Mbps $29.99 $49.95 $8.32 Performance 25 25/5 Mbps $39.99 $61.95 $2.47 Performance 75/5 Mbps $44.99 $64.95 $0.86 Extreme 150 150/10 Mbps $114.95 $114.95 $0.76 Extreme 250 250/20 Mbps $149.95 $149.95 $0.59 Gigabit Pro 2000/2000 $299.95 $299.95 $0.14 Table 2: Comcast/XFINITY Packages and Pricing

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Comcast can offer significant bandwidth capacity to residential and business subscribers.

Both Comcast and AT&T can offer voice and video services in addition to their Internet products.

While these prices and capacity may seem reasonable, neither of these last-mile providers are prepared to meet the City’s municipal broadband development policy objectives. In comparison with other Contra Costa County communities, for example, San Pablo is just above the middle (see “Figure 2: Contra Costa County Bandwidth Speeds by City” below).

Contra Costa County

Pittsburg Orinda Danville Pinole Martinez Pleasant Hill Hercules San Pablo San Ramon Brentwood Walnut Creek United States Lafayette El Cerrito Concord Moraga Richmond Clayton Antioch Oakley

0 10 20 30 40 50 60 70 80

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Figure 2: Contra Costa County Bandwidth Speeds by City

In fact, when compared to cities of similar size around the U.S., San Pablo falls right in the middle (see “Figure 3: Broadband Speeds in U.S. Cities Similar in Size to San Pablo” below).

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Similar Sized Cities

Leander, TX

Liberty, MO

Burlingame, CA

Sherwood, AR

Port Huron, MI

San Pablo

United States

Marion, IN

Rochester, NH

Statesboro, GA

Kent, OH

North Chicago, IL

0 10 20 30 40 50 60 70

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Figure 3: Broadband Speeds in U.S. Cities Similar in Size to San Pablo

These average speeds are adequate for maintaining status quo; however, if the City wants to distinguish itself (from competing cities) for economic development, it must offer broadband services that “stand out” from competing cities and counties.

Broadband Technologies AT&T uses a fiber to the node technology with traditional twisted pair DSL from the node to the subscriber. In some areas, AT&T will provide fiber to the premises.

Comcast uses fiber to the node and DOCSIS over coaxial to the subscriber premises. In August 2015, Comcast began advertising 2 Gbps service “where available” in the Bay Area. Comcast’s 2 Gbps service is delivered via fiber to the premises.

• More readily available than cable or DSL. • Usually slower speeds than cable or DSL. • Usually requires line of sight to access Wireless point. • Shared access point is subject to congestion.

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• Also known as DSL; DSL comes in several varieties. • Uses telephone and so is generally Telephone available. Lines • Constrained by distance limitations. • Speed is asymmetric usually between 1.5 to 15 Mbps downloads and just below 1 Mbps uploads. • Is DOCSIS or Data Over Cable Service Interface Specification. • Can offer speeds up to 100 Mbps. Cable • Data speeds are dependent on DOCSIS version and cable company’s configuration. • Usually available where cable is available. • Can offer symmetrical speeds. • Is the fastest connection offering commercially available speeds up to 100 Fiber Gbps – more than 6,500 times faster than a typical DSL connection. • Not widely available – most common only in middle-mile infrastructure. Table 3: Broadband Technologies To meet San Pablo’s broadband development public policy objectives, the capacity of fiber must be generally available to all premises throughout the City.

Business Models To develop a municipal broadband development strategy, we need to look for where policy objectives intersect with potential business models and available broadband delivery technologies.

Potential Models Four general municipal broadband models are currently prevalent.

1. Status Quo Development Status quo development pursues a municipal broadband development model of working with the incumbent providers to reach the City’s broadband development policy objectives. Unfortunately, to date, the status quo has not met the City’s objectives. Furthermore, dependence on the status quo cedes the possibility of realizing policy objectives to the City’s private sector partners.

2. “Changing the Equation” Model Blair Levin was the program manager responsible for developing the National Broadband Plan. For the last several years, Levin has been arguing that we need to “change the equation” and make it more economical for private companies to develop advanced broadband solutions in our communities. In the Levin model, a community identifies assets it has available (including

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October 14, 2015 SAN PABLO BROADBAND PLANNING

buying power). The community documents its assets and presents them to the marketplace. By providing assets, the community reduces the costs of broadband development and increases the likelihood that a private provider will build. The Levin model reduces the community role to owning a small set of assets that are leased or deeded to a private provider, who will then use those assets to develop broadband solutions. The private provider owns other network assets, provides operation and management, and offers retail services.

3. Power Utility Model The power utility model has been most successful in communities that own and operate their own power utility, such as Lafayette, Louisiana or Chattanooga, Tennessee. These communities have used revenue bonds to borrow the money needed to build fiber networks. They then operate and manage these networks and provide retail services.

4. Public-Private Partnership Model In the public-private partnership model the public partner retains ownership of the broadband asset. The asset is made available to multiple competing retail service providers. The network owner can provide network operations and management can outsource operational functions to a third party asset manager or network operator.

Based upon our analysis, a public-private partnership open access fiber to the premises model best meets the City’s policy objectives.

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Budget To establish a projected budget for the project, completed a preliminary design with the assistance of an outside plant engineering team. We first laid out proposed primary rings winding through many of the City’s business districts.

Figure 4: Potential Distribution Rings (in pink - city boundaries in red)

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With rings in place, we then divided the City into six proposed service areas (see “Figure 5: Six Potential Footprints/Service Areas” below).

Figure 5: Six Potential Footprints/Service Areas

In order to estimate units, we subsequently laid out a potential fiber design in one of the service areas (see “Figure 6: Potential Layout for a Footprint/Service Area” below).

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Figure 6: Potential Layout for a Footprint/Service Area

The data generated for the primary ring design and the potential service area layout were then extrapolated to the entire City.

We applied unit pricing garnered from work experience around the nation to the extrapolated data. In doing so, we found significant cost differences between directional boring and microtrenching (refer to “Table 4: Capital Cost Estimate” below).

BORING MICROTRENCHING Engineering $377,296 $377,296 Cabinets $275,000 $275,000 Construction $6,760,266 $5,200,293 Subscribers (45% take rate) $5,417,707 $5,417,707 Rings $2,136,579 $2,136,579 TOTAL $14,966,848 $13,406,874 Table 4: Capital Cost Estimate

Directional boring is a construction technique that functionally turns a directional drill on its side and bores a path in which to place conduit (see “Figure 7: Directional Boring along El Portal in San Pablo” below).

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October 14, 2015 SAN PABLO BROADBAND PLANNING

Figure 7: Directional Boring along El Portal in San Pablo

Microtrenching, on the other hand, uses a saw to cut a small trench (a “micro” trench) in which to place conduit (see “Figure 8: Microtrencher” below).

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Figure 8: Microtrencher

Microtrenching is significantly less expensive than directional boring or traditional trenching but microtrenching and directional boring both have their pros and cons.

Pros Cons Directional Boring • Places infrastructure 24” or • More costly. deeper. • Takes more time. • Causes minimal road disruption. • Is more common and therefore easier to find crews. Microtrenching • Lower cost. • Creates small cut in roadway. • Faster implementation. • Places infrastructure at 12” to 24“. • Fewer experienced crews. Table 5: Directional Boring vs. Microtrenching

After making a determination as to whether or not microtrenching will be permitted and after completing actual design work for the City, we will be able to develop a much more accurate capital cost estimate.

Financial Projections Financial performance over time is heavily dependent upon three factors: (i) capital expenditure, (ii) operational expenditures, and (iii) revenue generated through municipal broadband.

We have discussed capital expenditures, above.

With respect to operational expenditure models, we worked with existing retail providers in order to take advantage of their operating experience in developing such models. Revenues are a function of average

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October 14, 2015 SAN PABLO BROADBAND PLANNING revenue per unit (ARPU or the average amount of revenue generated by each subscriber) and, “take rates”. Again, we worked with existing retail providers to develop ARPU models. SRI completed a market survey and determined significant market potential for adopting Municipal Broadband in San Pablo.

Market Analysis (Likely Take Rates) A key component to any feasibility study for the deployment of Municipal Broadband is to commission a scientific survey of the target market; in this case, of both the business/commercial and residential segments within the City of San Pablo. Without viable market potential (market penetration), any such deployment will NOT realize it’s potential; one element, in the case at hand, being to serve as a new and dependable revenue stream for the City of San Pablo…one that generates more revenue for the City than is needed for its construction, maintenance, and operations over time. Thus, the intent of the present market analysis (market survey) is to determine LIKELY ‘Take Rates’ among both sectors of the community.

Historically, municipal broadband market penetration (Take Rates) in communities throughout the United States has stagnated between 15% to 17%. In order to generate positive cash flow in San Pablo, however, the present feasibility study has shown that market penetration must reach a minimum of a 20% Take Rate. Without this level of market penetration, a municipally-owned fiber optics network will never prove to be self-sustaining, let alone yield a positive cash flow. That’s the bad news.

The really good news, as seen in the graphic below, is that LIKELY market penetration in San Pablo ranges between 46% to 53% for the residential sector of the community and from 45% to 51% for the business/commercial sector of the community. In fact, MINIMUM market penetration will far exceed the 20% Take Rate needed for making Municipal Broadband a viable enterprise in San Pablo; minimum Take Rates in San Pablo will be over one-fourth (26%) within the residential market segment and nearly thirty percent (29%) in the business/commercial segment of the community.1

1 A copy of ALL of the findings from the present market analysis is available by contacting Dr. G. Gary Manross of SRI at [email protected].

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Likely ‘Take Rate’ for San Pablo Residential & Business Municipal Broadband Markets

Residential Business/Commercial 100% of Very Likely, Potential 100% of Very Likely, plus 100% of 68% 61% plus 100% of Somewhat Likely Market Somewhat Likely 46% 45% 100% of Very Likely, Likely 100% of Very Likely, plus 50 to 70% of to to plus 50 to 70% of Somewhat Likely Market Somewhat Likely 53% 51%

100% of Minimum 100% of Very Likely 26% 29% Very Likely Market Table 1: Composite Market Survey Results Figure 9: Market Potential for Residential and Business/Commercial Market Segments

Unique to the present study is the fact that SRI incorporated a paradigm that makes it possible to identify “Early Adopters”, who function as “opinion leaders” in the adoption process of any new product and/or idea in a given market or social system. This paradigm is called “Closing the Chasm” (Manross and Rogers, 2004);2 it is embedded in the classic adoption model called Diffusion of Innovations (Rogers, Everett M., 1995).3

Adoption is a follow-the-leader process; by definition, those in the mainstream follow early adopters, who function as “Opinion Leaders”. However, to apply this paradigm, it is necessary to identify Early Adopters in the respective target market; Manross developed a procedure whereby it is possible to identify, empirically and definitively, Early Adopters in any given market or social system.

As seen in the graphic below, likely Take Rate among early adopters of Municipal Broadband (municipal fiber optics) far exceeds those in the mainstream for BOTH the residential and business/commercial segments of San Pablo; it ranges between 63% and 66% in the residential segment and 90% to 94% in the business segment. Nothing could be more encouraging.

2 Manross, G. Gary and Everett M. Rogers, Closing the Chasm™: Between Early Adopters (Opinion Leaders) and the Mainstream, Strategy Research Institute, 2004. 3 Rogers, Everett M. (1995), Diffusion of Innovations (4th edition), New York: Free Press.

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Likely ‘Take Rate’ for San Pablo Among Early Adopters/Opinion Leaders

Early Residential Business/Commercial Adopters 72% Potential Market 100%

63% to 66% Likely Market 90% to 94% 53% Minimum Market 20% Figure 10: Market Potential for Early Adopters

Based upon preliminary estimates, as seen in the graphic below, the San Pablo project will reach a positive operational cash flow of $136k per month within three years; generating enough cash to sustain operations and meet reasonable debt service requirements. After that, the likelihood is extremely high that Municipal Broadband will yield positive cash flow; thus, become an on-going and dependable revenue stream for the City of San Pablo.

Positive Operational Cash Flow $1,500,000 $1,000,000 $500,000 $- $(500,000) $(1,000,000) $(1,500,000) $(2,000,000) $(2,500,000) $(3,000,000) $(3,500,000) $(4,000,000)

Capital Expense Operations Revenue Operational Revenue

Figure 11: Projected Operational Cash Flow

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Fortunately, as noted earlier in this discussion, the San Pablo project has a high tolerance for lower Take Rates – maintaining positive operational cash flow with as low as a 20% Take Rate (compared to the estimated 45% take rate from SRI’s market analysis).

The project has a reasonable tolerance for lower average revenue per user (or ARPU), as well. The project maintains positive operational cash flow if the ARPU falls as low as $25 (compared to SRI’s estimated average of $49).

The project has a fairly low to moderate tolerance for construction cost overruns.

All of these indicators are extremely positive.

Schedule We recommend proceeding with the following five phases of the project:

Engineering & CEQA Build Core Rings Pause to Stabilize Operations

•Engineer the entire •Identify a capital plan •Stabilize operations project for the entire project •Complete marketing •Reevaluate feasibility •Build core rings and plans for residential with engineered cost provide service to services estimates businesses •Reevaluate feasibility •Identify funding of ubiquitous mechanisms deployment •Complete CEQA studies

Build Service Areas Operate and Maintain

• Stagger starts to • Continue with third party accommodate budget and operations and marketing maintenance or “in- source” functions

Figure 12: Proposed Phases

The next phase, engineering and re-evaluation, is estimated to take ten months and to cost $377,296. After completion of engineering, construction of core rings will take about three months. Near the end of core ring construction, service providers will be able to begin offering service to businesses and other addresses on or near the core rings

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Table 6: Projected Schedule

The final phase of the project, of course, will be to secure subscribers in BOTH the business/commercial and residential segments of the City; this process involves public outreach (designed to introduce Municipal Broadband to the community) and marketing/sales. So that the City maintains control of the public policy message, we recommend that the cost of the 1st element (public outreach) be the responsibility of the City; the cost of marketing and sales will be shared by the City as well as the network operator and the service providers. As a public-private partnership, all three entities are stakeholders.

The present study was NOT intended to produce a formal proposal and cost parameters for public outreach, nor a marketing plan of action. Rather, the present project was designed to determine whether or not market potential is sufficient to justify the deployment of Municipal Broadband (a City-owned fiber optics network) in San Pablo. As it turns out, this is, indeed, the case.

Thus, assuming City officials decide to move forward with introducing Municipal Broadband to the community, a formal Public Outreach and Marketing Plan of Action will be developed and submitted to City officials as part of the proposed engineering and re-evaluation phase.

Conclusions and Recommendations The present project may be best thought of as providing the ‘intelligence’ needed for making a ‘Go, No- Go’ decision for introducing Municipal Broadband to the City of San Pablo. It’s similar to the effort that precedes any major public policy decision.

In the present case, the findings are clear; it’s a GO.

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In other words, the findings from this comprehensive feasibility study are that developing a public- private partnership, open access fiber-to-the-premises network in San Pablo is, indeed, feasible; in fact, it is one of the major drivers of realizing many of the City’s public policy objectives including, but not limited to: (i) Economic Development (attracting new business and commercial enterprise to the City, thus, creating new jobs for local residents), (ii) advancing health care in San Pablo through tele-medicine and other cutting-edge technologies, (iii) addressing the barrier known as the ‘digital divide’...plus many other objectives that are central to enhancing the quality of life for ALL San Pablo residents.

The next steps are:

• Complete Engineering

• The engineering cost estimate is $377,296 (at $1.75 per foot). • Complete the CEQA study requirements. • Completed engineering will allow us to refine our capital cost estimates and identify any red flags in the project this study may not have uncovered.

• Re-evaluate Feasibility

• With engineering complete, we will have a much more precise picture of the cost to build the network. We will use these refined cost estimates to re-evaluate project feasibility.

• Develop a comprehensive Public Outreach and Marketing Plan of Action

• This will be created once a final decision is made by City officials to move forward with introducing Municipal Broadband to San Pablo; but, BEFORE the 1st phase of installation has been completed and made operational.

It has been a pleasure partnering with San Pablo City officials in conducting the present Broadband Planning Study. We are encouraged with the findings from this comprehensive effort; and trust you are, as well. We look forward to moving to the next steps in this exciting and promising effort.

San Pablo

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Project Team This feasibility report would not have been possible without the guidance of the San Pablo City Council Broadband Ad-Hoc Subcommittee, consisting of Mayor Kathy Chao Rothberg and Councilman Rich Kinney.

The San Pablo City staff provided essential guidance, input, and oversight as well; especially Matt Rodriguez, City Manager; Larry Johnson, Information Technology Manager; and Charles Ching, Assistant to the City Manager – Economic Development.

Paul Recanzone from OHIvey is the lead author of this report. More information about Paul Recanzone and OHIvey can be found in the “OHIvey” section of the “Project Team” appendix.

Dr. G. Gary Manross, Ph.D., from SRI, led the market surveys and authored the market analysis in this report. More information about Dr. Manross and SRI can be found in the “Strategy Research Institute (SRI)” in the “Project Team” appendix.

We used sub-contractors to validate design and operations assumptions.

Supporting Documents This report is accompanied by the following supporting files:

 Modeling.xlsx A variable based interactive financial projection worksheet.  San Pablo.kmz A Google Earth map depicting the proposed preliminary design.

Document History Ver. Date Author Notes 0.01 3 Aug 2015 P. Recanzone First preliminary draft. 0.02 29 Sep 2015 P. Recanzone Intermediate draft. 0.03 5 Oct 2015 P. Recanzone First presented draft. 0.04 5 Oct 2015 P. Recanzone Updated version history to reflect correct version numbering. Corrected typographical errors on pages xxxi, xxxvi, and xxxv. 0.05 10 Oct 2015 P. Recanzone Updated documents to reflect feedback from 10/7/15 ad hoc subcommittee meeting input. Corrected additional typographical errors. 0.06 11 Oct 2015 P. Recanzone Corrected typographical errors. 1.01 14 Oct 2015 P. Recanzone Version accepted by City Council.

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Contents

Overview ...... a Scope ...... b Broadband Development Public Policy Objectives ...... b Current State ...... c Broadband Technologies ...... f Business Models ...... g Budget ...... i Financial Projections ...... m Schedule ...... q Conclusions and Recommendations ...... r Project Team ...... t Supporting Documents ...... t Document History ...... t Contents ...... u Tables ...... w Figures ...... w 1 Background Information ...... 1 1.1 The Municipal Broadband Problem ...... 1 1.2 Broadband Value ...... 2 1.2.1 San Pablo Broadband Development Policy Objectives ...... 2 2 State of Broadband ...... 11 2.1 City-Owned Municipal Broadband Assets...... 12 2.2 Middle Mile Options and Quality ...... 15 2.3 Last Mile Options and Quality ...... 15 2.3.1 Last Mile Technologies ...... 15 2.3.2 Private Sector Providers ...... 16 2.3.3 TestMy.Net Data ...... 23

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2.3.4 Ookla Data ...... 25 2.3.5 Pricing ...... 26 2.4 Current State Summary ...... 26 3 Development Options ...... 27 3.1 Principles ...... 27 3.1.1 Open and Wholesale ...... 27 3.1.2 “Carrier-Class” ...... 29 3.1.3 High Scalable Bandwidth ...... 30 3.1.4 Open and Independent Architecture ...... 31 3.2 Solutions...... 32 3.2.1 Status Quo ...... 36 3.2.2 Changing the Equation ...... 37 3.2.3 Power Utility ...... 46 3.2.4 Public-Private Partnership ...... 47 4 Operations Plan ...... 77 4.1 Capital Cost Estimates ...... 77 4.2 Market Conditions ...... 81 4.2.1 Industry Description ...... 82 4.2.2 Market Segments ...... 84 4.2.3 Competition ...... 96 4.2.4 Market Research and Marketing Strategy ...... 98 4.3 Financial Projections ...... 100 5 Conclusions and Recommendations ...... 104 6 Appendixes ...... i 6.1 Project Team ...... i 6.1.1 OHIvey ...... i 6.1.2 Strategy Research Institute (SRI)...... i 6.2 Sample Dig-Once Ordinance ...... iv 6.3 Limited Deployment/High-Value Target Model – San Pablo Case Study ...... xiii 6.4 Publicly Owned and Operated Model – Bristol Virginia Utilities Case Study ...... xxi 6.5 Open Access Fiber to the premises Lessons Learned – UTOPIA Case Study ...... xxvi

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6.5.1 Relevant Factors ...... xxviii 6.5.2 It is a COMMUNITY Network...... xlii 6.6 Glossary ...... xlvi

Tables Table 1: AT&T Packages and Pricing ...... d Table 2: Comcast/XFINITY Packages and Pricing ...... d Table 3: Broadband Technologies ...... g Table 4: Capital Cost Estimate ...... k Table 5: Directional Boring vs. Microtrenching ...... m Table 6: Projected Schedule ...... r Table 7: Last Mile Technologies ...... 16 Table 8: AT&T Packages and Pricing ...... 26 Table 9: Comcast XFINITY Packages and Pricing ...... 26 Table 10: Blandin Foundation Municipal Options for Fiber Deployment ...... 35 Table 11: Historic Infrastructure Deployment Friendly Policies ...... 39 Table 12: Active vs. PON Technical Assessment ...... 57 Table 13: Active vs. PON CAPEX Assessment ...... 57 Table 14: Active vs. PON OPPEX Assessment ...... 58 Table 15: Active vs. PON Bandwidth Availability ...... 60 Table 16: Capital Cost Estimate ...... 79 Table 17: Directional Boring vs. Microtrenching ...... 81 Table 18: San Pablo Address Breakdown including Nearby Homeowners’ Associations ...... 85 Table 19: Business Market Segment Summary...... 86 Table 20: Summary of Residential Market Segment Characteristics ...... 89 Table 21: Summary of Transport Characteristics ...... 91 Table 22: Summary of Other Revenue Opportunities ...... 93 Table 23: AT&T Summary ...... 96 Table 24: AT&T Packages and Pricing ...... 97 Table 25: Comcast Summary...... 97 Table 26: Comcast Packages and Pricing ...... 97 Table 27: Proposed High Level Project Schedule ...... 101 Table 28: UTOPIA Goals and Results ...... xxvi

Figures Figure 1: Comcast and AT&T Market Shares ...... d Figure 2: Contra Costa County Bandwidth Speeds by City ...... e Figure 3: Broadband Speeds in U.S. Cities Similar in Size to San Pablo ...... f Figure 4: Potential Distribution Rings (in pink - city boundaries in red) ...... i Figure 5: Six Potential Footprints/Service Areas ...... j Figure 6: Potential Layout for a Footprint/Service Area ...... k Figure 7: Directional Boring along El Portal in San Pablo ...... l Figure 8: Microtrencher ...... m

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Figure 9: Market Potential for Residential and Business/Commercial Market Segments ...... o Figure 10: Market Potential for Early Adopters ...... p Figure 11: Projected Operational Cash Flow ...... p Figure 12: Proposed Phases ...... q Figure 13: Global Broadband Quality and Penetration Leaders ...... 11 Figure 14: High Level Internet Diagram ...... 14 Figure 15: Internet Service Provider Market Share (based on TestMy.Net data) ...... 17 Figure 16: Market Survey Internet Access Technology Results ...... 18 Figure 17: Average Download Speeds over Time (based on TestMy.Net data) ...... 23 Figure 18: San Pablo Data Speeds Compared with Contra Costa County Cities ...... 24 Figure 19: San Pablo Data Speeds Compared to U.S. Cities of Similar Size ...... 25 Figure 20: Average Advertised Broadband Download Speed by Country ...... 31 Figure 21: Broadband Investor Return on Investment Formula...... 38 Figure 22: Change the Broadband Math ...... 38 Figure 23: Becoming a Fiber-Friendly Community ...... 40 Figure 24: Active vs. PON Exposure to Fiber Cut Failures ...... 59 Figure 25: Maximum Limit to Availability Due to Fiber Cuts ...... 60 Figure 26: Active vs. PON Cost to Scale ...... 62 Figure 27: OSI Layered Model ...... 63 Figure 28: Cascading Aggregation ...... 70 Figure 29: Conceptual Network Overview ...... 72 Figure 30: Physical vs. Logical Service Paths ...... 76 Figure 31: Potential Distribution Rings (in pink - city boundaries in red) ...... 77 Figure 32: Six Potential Footprints/Service Areas ...... 78 Figure 33: Potential Layout for a Footprint/Service Area ...... 79 Figure 34: Directional Boring along El Portal in San Pablo ...... 80 Figure 35: Microtrencher ...... 81 Figure 36: Market Segments ...... 84 Figure 37: Projected Capital Expenditure Schedule ...... 102 Figure 38: Revenue with Capital and Operating Expenditures ...... 103 Figure 39: Santa Monica City Net ...... xvi Figure 40: UTOPIA Revenues and Expenses ...... xxvii Figure 41: Crossing the Chasm, Dr. Geoffrey A. Moore, Harper Business, NY, 1999 ...... xxxii Figure 42: UTOPIA Take Rates over Time ...... xxxiii Figure 43: Fiber Project Monthly Revenue and Expense ...... xxxiv Figure 44: Lindon Available Addresses (in green) ...... xxxvi Figure 45: Payson Available Addresses (in green) ...... xxxvii Figure 46: Lindon vs. Payson Take Rates ...... xxxviii

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1 Background Information

1.1 The Municipal Broadband Problem Much like the rail systems of the late 1800’s,4 today’s advanced communications infrastructures represent a means by which communities may participate in, or find themselves left out of, the global economy. Many communities are discovering that critical broadband needs in their business and residential markets are going unmet. Incumbent network owners consume limited public easement space with monopoly controlled networks. Historic telecommunications business practices and market forces encourage these private companies to work toward broadening their revenue streams by extending their natural monopoly through vertical integration leading to cable companies acquiring content producers and traditional telephone companies merging with wireless providers. Quarterly reporting requirements demand behavior that maximizes short-term profits. This leads to incumbents delaying infrastructure upgrades – not only to avoid capital costs, but also to maintain the appearance of bandwidth scarcity, thus allowing companies to charge higher prices for lower quality than found in many other countries around the world.

However, advanced communications infrastructures are essential for the current and future economic vitality of communities. Communities have begun to see the need to break the cycle of monopoly- driven scarcity and vertical integration. In the 19th century, city councils struggled with ways to entice the railroad barons to include them in transportation systems. In the 20th century, cities and towns became experts at deploying critical infrastructure including, roads, electricity, and water. In the 21st century, public policy demands that, rather than begging and pleading with the incumbent providers, municipalities apply their infrastructure skills to improving broadband availability and competition.

For more than 40 years, IBM dominated all aspects of the computing business. IBM maintained their dominance, in part, by tying application software to hardware and individual hardware components together in tightly controlled proprietary packages. In the mid-1970’s, IBM misread the growing demand for smaller, more accessible computing services. A grass roots revolution to create “personal” computers with interchangeable components and application software that could run on multiple vendors’ hardware platforms grew in basements and garages across the country. This “open” model was a disruptive force in the computing world and ultimately led to the marginalization of mainframe computers and of IBM as a computer manufacturer.5

4 In Railroaded: The Transcontintentals and the Making of Modern America, Richard White shows economic thinking in the late 1800’s demanded a conversion from overbuild competition to railroad and telegraph monopolies; monopolies that could be sustained regardless of the arrogance of power, the impact of inept leadership, or the fleecing of customers. 5 Charles H. Ferguson and Charles R. Morris do an excellent job of chronicling the rise and fall of IBM in their book Computer Wars (1994; Random House Times Books). Ferguson uses the example of IBM extensively in his follow on work The Broadband Problem: Anatomy of a Market Failure and Policy Dilemma (2004; Brookings Institution Press).

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Today, a similar revolution is growing in the telecommunications industry. For decades, Bell Telephone, the “Baby Bells”, and a handful of cable providers have maintained monopolistic control of telecommunications networks throughout the country. While the components to build a telecommunications network cannot easily be kept in one’s garage, many municipalities, cooperatives, and other organizations are recognizing the growing grass roots demand for true consumer choice on abundant broadband networks. The disruptive business model represented by public-private partnership open access fiber to the premises networks stands as the best model to answer this grass roots demand and to revolutionize the delivery of telecommunications services.

In sum, we believe broadband in America is inadequate – a problem that is only exacerbated in historically low adoption communities. We believe traditional business models and investor demands diminish incumbent providers’ ability and desire to make the significant changes needed to create an internationally competitive broadband environment. Furthermore, we believe that telecommunications infrastructure demonstrates qualities of natural monopoly, market failure, and common public benefit. Any of these qualities call for government intervention and action. However, we believe that the development, provisioning, and marketing of services offered on broadband infrastructure benefit from the efficiencies created by free market competition. To bridge the gap between public need and the benefits of market competition, we believe that, in San Pablo, the best model for improving broadband services is to create a public-private partnership that separates infrastructure from services and places the primary responsibility for infrastructure in the public realm and the primary responsibility for services in the free market.

1.2 Broadband Value The public sector does not enter into new ventures lightly. Public servants recognize that in their ability to tax and levy fees, they are stewards of public funds and of the public trust. Elected representatives and their professional staffs must base their decisions on the public policy objectives of the communities they serve. Often a community’s objectives are very specific to the respective community, but usually they can be grouped into the broad categories of public safety, economic development, infrastructure development and maintenance, building a sense of community, education, quality of life, among other objectives.

1.2.1 San Pablo Broadband Development Policy Objectives In this feasibility process, the City of San Pablo identified and adopted a set of broadband policy objectives that reflect on the value they find in broadband development.

1.2.1.1 What The City of San Pablo will investigate and engage in appropriate municipal broadband development.

1.2.1.2 Why The City believes access to broadband:

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 Is key to diversifying the local economy, which is essential if the City is to remain fiscally sustainable in the long-term; thus…

1.2.1.3 Background

1.2.1.3.1 Economic Development In 19th century America, a railroad spur and stop could make or break a community’s economy. In the 20th century, interstate exits became a critical piece of transportation infrastructure needed to support a local economy. In the 21st century, critical transportation infrastructure is as much about moving bits and bytes as bricks and mortar. Economic development has become dependent upon access to reliable bandwidth of sufficient capacity to attract and support the “knowledge workers” of the 21st century.

Broadband enabled technologies unquestionably enhance economic opportunity. In May of 2012, David Salway, in an article for About.com asks, “There is little debate that increasing broadband access spurs economic development, but can this be quantified?”6 Salway then compiles a list of some of the leading research completed on the economic effects of broadband development. Paraphrasing Salway’s list:

 In an Associated Press/USA Today article by Joelle Tessler, Robert Atkinson of The Information Technology and Innovation Foundation7 asserts that, “a $10 billion investment in broadband would produce as many as 498,000 new jobs.”8  In “The Effects of Broadband Deployment on Output and Employment: A Cross-Sectional Analysis of U.S. Data,” Robert Crandall, William Lehr, and Robert Litan of the Brookings Institute

6 Salway, David (May 2012). “Broadband as an Economic Driver.” About.Com. http://broadband.about.com/od/economicdevelopment/a/Broadband-As-An-Economic-Driver.htm. 7 http://www.itif.org/ 8 Tessler, Joelle (6 February 2009). “Broadband Funding in Stimulus Plan Sparks Debate.” USA Today. http://www.usatoday.com/tech/news/2009-02-06-broadband-funding_N.htm.

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argue that for every one percentage point increase in broadband penetration in a state (or community), employment is projected to increase by 0.2 to 0.3 percent per year.9  In “Broadband Infrastructure and Economic Growth,” Nina Czernich, et. al., find that “a 10 percentage point increase in broadband penetration raises annual per-capita growth by 0.9-1.5 percentage points.”10  Between 1998 and 2002, communities that gained access to broadband service experienced an employment growth increase of 1% to 1.4%, a business establishment increase of 0.5% to 1.2%, and a rental value increase of 6%.  Kristen Van Gaasbeck, et. al. wrote in their “Economic Effects of Increased Broadband Use in California Research Report” that, “…this analysis paints a clear picture of how increased broadband use (and the migration from dial-up to broadband) affects employment and payroll in California and a select group of its regions – the direction of the effect is always positive and the magnitude depends on the size of the shift in the percentage of the adult population using a broadband Internet connection. Even a small increase in broadband use could generate a substantial cumulative gain over the next 10 years compared to what could be expected under business as usual conditions.”  For every $1 million granted for broadband development, 15 jobs would be created.

1.2.1.3.1.1 Supporting Existing Businesses Broadband supports existing businesses by extending cloud capabilities to the local business and otherwise enhancing business productivity. Abundant and reliable broadband services to small businesses may create new opportunities for business proprietors to understand and better reach their markets. Furthermore, as online sales continue to increase, broadband access will make it possible for San Pablo businesses to compete in the global (worldwide) marketplace.

One key business in San Pablo is the Lytton Casino San Pablo. The casino requires reliable, affordable, and abundant broadband. The possible expansion of online gaming services only magnifies this need.

1.2.1.3.1.2 Supporting the Growing Medical Services Industry The development of Plaza San Pablo as a medical campus will create many exciting opportunities for the City. Coupled with broadband development, the City can move to the forefront of tele-health development. Focusing medical services development on extending tele-health services to households with a primary language other than English, or to lower income households, may create a vibrant niche within the broader health services industry for San Pablo.

9 Crandall, Robert W., William Lehr, and Robert Litan (July 2007). “The Effects of Broadband Deployment on Output and Employment: A Cross-Sectional Analysis of U.S. Data.” The Brookings Institute Issues in Economic Policy; Washington, DC. http://www.brookings.edu/views/papers/crandall/200706litan.pdf. http://www.brookings.edu/~/media/research/files/papers/2007/6/labor%20crandall/06labor_crandall.pdf. 10 Czernich, Nina, Oliver Falck, Tobias Kretschmer, and Ludger Woessman (December 2009). “Broadband Infrastructure and Economic Growth.” CESIFO Working Paper. http://www.cesifo.de/pls/guestci/download/CESifo%20Working%20Papers%202009/CESifo%20Working%20Paper s%20December%202009/cesifo1_wp2861.pdf.

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In preliminary conversations with LifeLong Medical, LifeLong Medical has expressed a keen interest in remote healthcare monitoring – especially of chronic conditions. Further, we have had preliminary conversations with a capital investment organization interested in developing remote health monitoring equipment and services. The potential combination of San Pablo’s fiber, LifeLong Medical’s expertise and community involvement, and capital for remote health care monitoring could truly set the City apart.

1.2.1.3.1.3 Attracting New Businesses Most new businesses require abundant, affordable, and reliable broadband services. Currently, more than 72% of broadband subscriptions in San Pablo are with Comcast. Cable services like Comcast’s suffer from more congestion and are less reliable than fiber-based telecommunication services. Businesses depend upon reliable access to abundant bandwidth.

Providing affordable fiber services will contribute to attracting more “white collar” type businesses to San Pablo and may help generate private investment opportunities and contribute to diversifying the City’s economy.

Exceptional quality and capacity broadband driven to reasonable prices by real competition enables professionals to work around the world from their home office. But it is also having another interesting impact. Tim Harford writes:11

In a study published in the American Economic Review, researchers examined 4,000 US- based commercial innovations and found that more than half came from just three areas: California, New York/New Jersey, and Massachusetts. Almost half of all US pharmaceutical innovations were invented in New Jersey, a state with less than 3 percent of the nation’s population.

In theory, technology should allow new-economy firms to prosper as easily in Nebraska as in Silicon Valley. But far from killing distance, it has made proximity matter more than ever.

Harford suggests that this may be because, as Harvard economist Ed Glaeser argues, “technology and face-to-face interactions are complements like salt and pepper, rather than substitutes like butter and margarine. Paradoxically, your cell phone, email, and Facebook networks are making it more attractive to meet people in the flesh.” In other words, our electronic lives enrich and enhance our personal lives and strengthen our communities.

1.2.1.3.1.4 New Work Opportunities Better broadband access is making it easier for workers to tele-commute and otherwise engage in non- traditional home-based businesses. Abundant and reliable broadband can extend international business

11 Harford, Tim (18 January 2008). “How Email Brings You Closer to the Guy in the Next Cubicle.” Wired; Issue 16 Volume 2. http://www.wired.com/culture/lifestyle/magazine/16-02/st_essay.

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October 14, 2015 SAN PABLO BROADBAND PLANNING opportunities to San Pablo residents and make it easier for the workforce in the City to support international businesses in and around the Bay Area.

Domestic businesses often have mandates to increase diversity. With broadband access, San Pablo’s population will be better positioned to fill this need.

1.2.1.3.2 Equity There is a digital divide in America. The technology “haves” can readily access information and resources that are unavailable to the “have-nots”. Technology “haves” gain skills required in the modern workplace and, therefore, have greater employment and advancement opportunities. They have access to better education resources and are more able to get information to help them make informed decisions.

The Pew Research Center found that key demographic factors related to the digital divide include (but, are not necessarily limited to) age, income, educational attainment, disability, and non-English-speaking preference.

Looking at these factors:

 46% of San Pablo residents fall in the high bandwidth adoption ages between 15 and 44. The traditionally low broadband adoption age group 65 and older represents only about 9% of the City’s population compared to 11.4% statewide.  San Pablo’s 2013 estimated median household income is $44,983 compared to $61,094 in the state of California. These lower incomes likely reflect lower broadband adoption and a higher propensity to engage with the Internet only via alternative devices like smart phones.

 81% of California’s population over 25 has a high school degree or better and 31% of the population has a Bachelor’s degree or higher. In San Pablo, 29% of the population does not have a high school diploma; only 12% of the population has a Bachelor’s degree or higher. This lower educational attainment likely results in a lower perception of the relevance of online services.

 Much of the Internet is not disability-friendly. Residents with disabilities may find using digital devices difficult and may find online services inaccessible once they are online. 12% of San Pablo residents live with a disability, which is slightly higher than the 10% of California residents living with a disability.

 San Pablo has a large non-English preference community. 67% of the population speaks a language other than English and 35% of the population speaks English less than “very well”. Furthermore, 43% of the City’s population is foreign born.12

12 Demographic statistics for this section were secured through the Census Fact Finder at http://factfinder.census.gov/faces/tableservices/jsf/pages/productview.xhtml?src=CF

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This high non-English-speaking preference, higher disability, lower educated, and lower income demographic profile in the City contributes to the City having a higher percentage of technology “have- nots” than surrounding communities.

Many on the “have-not” side of the digital divide are there by choice – the Pew Research Center found that 34% of broadband non-adopters do not use the Internet because they find it insufficiently relevant. These non-adopters do not find sufficient value in online services to overcome cost and skill or knowledge barriers. Yet, Internet access is relevant. One of the purposes of introducing Municipal Broadband into San Pablo is to help demonstrate the relevance of online services and information.

Efforts to help close the digital divide may include:

 New infrastructure deployment to increase capacity and consumer choice.  Access programs that make it easier for people to get broadband services.  Education and outreach – including marketing and advertising.

1.2.1.3.3 Education No amount of technology can ever replace the powerful impact of a teacher interacting face-to-face with a student one-on-one, or in reasonably-sized classrooms. But even the best of teachers can augment the education they offer with online resources. Furthermore, abundant broadband can bring critical training resources and those in need of the training together more often and in more ways than can be imagined.

The nation’s schools suffer from inadequate Internet access and IT training. For most, access is too slow with insufficient bandwidth to allow creative and expansive online learning, such as video conferencing or collaborative work. Schools with constrained bandwidth have limited options for classroom use of IT applications, such as streaming video. The Benton Foundation explains:

Distance learning over broadband is a distant dream. Online curricula is offline. Teachers are insufficiently trained to use technology in their classrooms, so that whatever technology is available to them languishes. Students are taught the basic 3 Rs, as required by the No Child Left Behind Act, but not the digital skills that will enable them to translate those 3 Rs into success in today’s Information Age.13

Many schools are using the Internet to expand course offerings. For instance, in Greenville, South Carolina, students are enrolling in an online Latin course taught by a teacher at another district school. Elsewhere, students can use the Internet to take higher level or better-quality courses than those available at their home schools. The Internet helps break down the walls of the classroom, allowing students to participate in remote classes and in virtual field trips. Students are going online and “touring the Smithsonian National Air and Space Museum, experiencing a tribal dance in Africa, or scouring the depths of the Pacific Ocean in a submarine.” Users are exploring the digital archives at the Library of

13 Rintels, Jonathan (2008). “An Action Plan for America: Using Technology and Innovation to Address our Nation’s Critical Challenges: A Report for the new Administration from the Benton Foundation.” Benton Foundation. http://benton.org/sites/benton.org/files/Benton_Foundation_Action_Plan.pdf.

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Congress and collaborating with students, professors, and government officials in other states and around the world.14

According to the “America’s Digital Schools 2008”, 37% of school districts anticipate a problem obtaining sufficient bandwidth and the majority have implemented policies to conserve bandwidth by limiting student Internet use15. Nonetheless, Internet proficiency is assumed at the college level, leaving many children at an educational disadvantage.

A municipal fiber network will make it possible for the Contra Costa Unified School District and the Contra Costa College campuses to extend their academic classes and programs into homes and businesses throughout the City, and elsewhere, if they choose to do so. Doing so will help increase high school graduation and college attendance rates and better prepare the City’s youth for entry into the workforce.

Distance education also offers a unique opportunity for San Pablo’s diverse population to receive education from their native countries in their native languages. The borderless nature of the Internet provides a truly unique opportunity for a family integrating into American culture to retain direct ties to their heritage.

Outside of traditional classroom environments, broadband enables adult continuing education and professional development by bringing instructors and students together without travel costs.

It’s highly likely that many of the foreign-born residents of San Pablo have professional skills and certifications developed in their native countries. Upon coming to America, many of these individuals have discovered that their certification status has not migrated with them. Often, these professionals are severely underemployed as they struggle to find ways to renew their certification status and return to their professional careers. Distance education and online certification can help ease that burden.

1.2.1.3.4 Public Safety Ubiquitous deployment of abundant broadband can support public safety. Police and private security companies can deploy high definition and heat sensitive security cameras for remote monitoring of sensitive areas within the community. Police departments can more effectively use systems like Shot Spotter to detect and deter violent crime. Fire departments can take advantage of data provided via intelligent alarm systems.

14 Rintels, Jonathan (2008). “An Action Plan for America: Using Technology and Innovation to Address our Nation’s Critical Challenges: A Report for the new Administration from the Benton Foundation.” Benton Foundation. http://benton.org/sites/benton.org/files/Benton_Foundation_Action_Plan.pdf. 15 Greaves, Thomas W. and Jeanne Hayes (2008). “America’s Digital Schools 2008: The Six Trends to Watch.” The Greaves Group; The Hayes Connection.

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One key element of public safety is a sense of community. People who know their neighbors tend to look out for each other. Abundant bandwidth enables better social applications and social applications build a sense of community. To quote from the 2013 Broadband Communities Fiber Primer,16

Social applications build a sense of community. They range from community-focused social networking sites to intranet sites that feature local news and events to video channels that broadcast local athletic contests, artistic productions and political meetings. Because these offerings can be interactive, they easily trump conventional cable public- access stations.

1.2.1.3.5 Environmental Impact Ubiquitous deployment of true broadband can support energy and water conservation. Smart meter deployments in less robust network environments must rely upon minimizing data communications. This need to conserve bandwidth hampers the value of the smart meter as a real-time feedback tool the subscriber can use to monitor usage and change behavior. With universal deployment of broadband throughout the City, utilities can open the floodgates of data to and from the meter and the utility subscriber.

Through broadband networks, traffic management teams can monitor and more effectively manage traffic flows – saving travelers fuel and time.

True broadband to every address opens telecommuting options unheard of over traditional networks. Extending an effective work environment to the workers’ homes means they have to drive in to work less often – saving workers fuel and time, as well as addressing a host of challenges inherent to the environment.

For example, the United States represents 5% of the world’s population, yet is responsible for more than 20% of global greenhouse gas emissions. There is a growing scientific consensus that countries must reduce their carbon emissions by 25% to 40% from 1990 levels by 2025 and upwards of 80% by 2050 to avoid the most catastrophic effects of climate change.

The widespread adoption of Information and Communication Technologies (ICT) can facilitate these needed reductions. Like most industries, ICT is directly responsible for greenhouse gas emissions: The industry consumes 6% to 10% of global energy and is responsible for 2% to 3% of the world’s carbon emissions, roughly the same contribution as aviation. Conversely, ICT also functions as an “enabler” to support significant carbon reductions from other sources. In fact, one analysis holds that ICT alone could reduce global greenhouse gas emissions by 15% by 2020 (an amount at least five times larger than the sector’s carbon footprint), representing about $946.5 billion (with a ‘B’) in savings to the economy. Another study finds that widespread adoption of ICT could support a net reduction of 1 billion tons of greenhouse gas emissions over 10 years.17 Indeed, fiber to the premises—which is, broadly speaking,

16 http://www.bbcmag.com/Primers/BBC_Aug13_Primer.pdf 17 Joseph P. Fuhr Jr. and Stephen B. Pociask, "Broadband Services: Public and Environmental Benefits," American Consumer Institute, October 31, 2007, 1-3, www.acicitizenresearch.org/Final%20Green%20Benefits.pdf.

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October 14, 2015 SAN PABLO BROADBAND PLANNING based on ICT—conveys a broad range of environmental benefits, including increased opportunities for, and access to, telework, teleconferencing, telemedicine, and e-commerce… as well as increased efficiencies in home energy use and transportation. Connectivity is “the backbone” of each of these solutions.

1.2.1.3.6 Owner-Occupied Housing San Pablo has a high percentage of renter-occupied housing (about half of all houses are renter- occupied). There is some evidence that many of these renter-occupied units are owned by individuals or firms outside of the City.

Better broadband services and consumer choice of broadband may have some impact upon increasing owner-occupancy. Also, fiber connectivity to the premises increases home values and encourages owner-occupancy.

1.2.1.4 Public Policy Conclusion As the City investigates and invests in a municipal broadband solution, it is important to understand the public policy objectives targeted with such an endeavor and to ensure any broadband development is conducted in alignment with these public policy objectives. The City recognizes a need to take immediate steps to enhance economic development, education, and public safety; equally important, to bring closure to the digital divide by ensuring equitable access to broadband services for ALL San Pablo residents. Expanded broadband services may also reduce environmental impacts and may encourage higher owner occupancy rates.

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2 State of Broadband It is unlikely AT&T, Comcast, and other incumbent providers in San Pablo will work aggressively to pursue the public policy benefits sought by the City. The U.S. lags behind the rest of the industrialized world in broadband capacity, quality, and adoption. Both history and current policy suggest incumbent telecommunications providers will continue to consolidate and protect their monopoly positions. Once secure in their monopoly, Wall Street discourages the capital investment required to upgrade 20th century architectures to meet the ever expanding needs of the 21st century.

The financial market forces driving private incumbent network capital investment have dampened broadband availability across the nation causing the U.S. to lag behind other industrialized nations. Nationally, the Ookla Net Index ranks the United States 27th in connection speed.18 “Figure 13: Global Broadband Quality and Penetration Leaders”19 shows the U.S. lagging behind other developed countries in broadband measures of both quality and penetration.

Figure 13: Global Broadband Quality and Penetration Leaders

18 http://www.netindex.com/download/allcountries/ 19 “Figure 13: Global Broadband Quality and Penetration Leaders” and the data supporting it come from the Said Business School’s (University of Oxford) “Third Annual Broadband Study Shows Global Broadband Quality Improves by 24% in One Year” published in 2010.

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In “The Global Competitiveness Report 2011-2012,” the World Economic Forum ranked the U.S. 18th in Internet users/100 population, 18th in broadband Internet subscriptions/100 population, and 26th in Internet bandwidth measured as kbps/capita (p 363).20 Lagging in broadband quality and penetration hurts U.S. competition on the world stage.

California’s broadband environment ranks quite high compared to the rest of the U.S. California’s service providers offer 94% broadband coverage.21 California has the third highest average broadband speeds of all U.S. states22 with an average download speed of 42.9 Mbps and several of the fastest cities in the U.S. This makes it tough for a California city to distinguish itself competitively from other cities – especially if the city is relying on the efforts of its incumbent providers.

When we looked at the current state of broadband in San Pablo, we considered three factors:

 Available municipally owned assets;  Middle mile options and quality; and,  Last mile options and quality.

2.1 City-Owned Municipal Broadband Assets The City of San Pablo owns limited municipal broadband assets. The City has some vertical assets and some wireless infrastructure. The wireless infrastructure falls into three categories:

1. City managed wireless infrastructure used to connect some remote facilities to the network core at the city offices. 2. Shotspotter uses a proprietary wireless system to manage its services. Shotspotter Sales and Marketing (510) 794-3144 Carlos Medina Project manager (650) 960-9228 3. Odin Systems has installed a proprietary wireless system to manage video surveillance cameras. Dustin Saylor [email protected] (619) 850-8901

Additionally, the City has fiber under San Pablo Avenue from the city offices to the public safety building.

20 Said Business School, University of Oxford (1 October 2009). “Global Broadband Quality Study Shows Progress, Highlights Broadband Quality Gap: Broadband Quality Improves around the World Despite Economic Downturn.” University of Oxford; London. Retrieved 24 Feb 2012, from http://www.sbs.ox.ac.uk/newsandevents/Documents/BQS%202009%20final.doc. 21 See http://broadbandnow.com/California. 22 See http://broadbandnow.com/.

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In brief conversations with Shotspotter and Odin, we do not find that the City will see immediate advantages to these systems through the implementation of a municipal network. The Shotspotter system engineers are more comfortable with their transport technology. The Odin Systems engineers expressed interest in a possible migration to fiber based transport, but do not see it as critical to their system.

This reaction from both vendors is reasonable. These systems are designed to meet the most common service level requirements in the cities they serve.

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Broadband delivery shares some characteristics regardless of speed or specific infrastructure.

The Internet is sometimes called the “information superhighway” and it can be understood using a road analogy. Like the road system, the Internet has “highways” and “surface streets”. On the information superhighway, the highways are called “middle mile” infrastructure and the surface streets are called “last mile”.

Of course, surface streets and freeways come in many varieties. Highways range from multi-lane interstate freeways to two-lane state highways. Surface streets can be major collector roads, neighborhood streets, or even driveways. The broadband road system has as just as much variety as the streets. Because of this variety, we may sometimes need to break last mile infrastructure into distribution level infrastructure (collector roads), access level infrastructure (neighborhood roads), or drop level infrastructure (driveways). We may need to talk about “off-ramps” or add/drop points on middle mile infrastructure. We may need to layer Internet access by local, regional, and national/international Internet service providers. When we need to do so, we will do our best to explain what we are talking about. For most of this strategic plan, we are going to focus on the last mile.

Before returning to the report, we need one more piece. Just like the road system tends to channel vehicle traffic towards large population centers where multiple roads (and other transportation options) come together, broadband networks channel data traffic toward “peering points” or “Internet exchange points” (IXPs). Peering points are data centers where national and international broadband networks (called Tier 1 Networks) converge. At these peering points, Internet traffic can easily cross from one major network to another and, for the user, viewing a web page from South Africa can be just as easy as watching a movie hosted on a server in South Carolina; sending an email to your grandkids in Duluth can be just as easy as video conferencing with your client in Dusseldorf.

Figure 14: High Level Internet Diagram

“Figure 14: High Level Internet Diagram” depicts how these pieces interrelate. The black route lines at the bottom of the diagram (from the “Internet users” cloud) represent portions of last mile infrastructure. The black route lines in between the local and regional ISPs (the pink and green clouds) and between the national and international networks (the purple, orange, and blue clouds) represent middle mile infrastructure.

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2.2 Middle Mile Options and Quality San Pablo enjoys significant middle mile options and availability. Level (3), AT&T, and Comcast each have enterprise level middle mile fiber in or very near to the City. Other middle mile providers may also have fiber access into the City. The multiple providers make middle mile bandwidth in the City abundant, reliable and affordable.

2.3 Last Mile Options and Quality As we look at last mile options and quality, we need to look most closely at incumbent service providers, the technologies they are using to deliver bandwidth, and their prices.

2.3.1 Last Mile Technologies As we begin a discussion of last mile options and quality, we should spend a moment to introduce typical last mile distribution technologies.

• More readily available than cable or DSL. • Usually slower speeds than cable or DSL. • Usually requires line of sight to access point. • Shared access point is subject to congestion. Wireless • Is a shared medium technology and sensitive to congestion from multiple users. • Usually uses unlicensed spectrum for last mile delivery. This unlicensed spectrum is frequently congested in urbanized areas like San Pablo. • Several transmission technologies exist on traditional twisted pair copper lines. The most common is DSL. DSL comes in several varieties. • Uses telephone cabling and so is generally available. Telephone • Constrained by distance limitations. Signal Lines quality – especially for higher bandwidth versions – drops off dramatically as distance from the point of signal generation increases. • Speed is asymmetric, usually between 1.5 to 15 Mbps downloads and usually about 1 Mbps uploads.

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• Transmission technology is called DOCSIS or Data Over Cable Service Interface Specification. • Can offer speeds over 100 Mbps. • Data speeds are dependent on DOCSIS version and cable company’s configuration. Cable • Is a shared medium technology and sensitive to congestion from multiple users. • Usually available where cable is available. • Cable companies (like Comcast) are taking advantage of the fiber needed to support DOCSIS nodes in neighborhoods to offer fiber services. • Can offer symmetrical speeds. • Is the fastest connection offering commercially available speeds up to 100 Gbps – more than 6,500 times faster than a typical DSL connections. Typical fiber deployments are 1 Gbps symmetrical Fiber speeds – or 10 times faster than typical cable connections and 65 times faster than typical DSL connections. • Not widely available as a last mile infrastructure – only about 20% of U.S. households and businesses have access to fiber to the premises.23 Table 7: Last Mile Technologies

2.3.2 Private Sector Providers With a basic understanding of broadband delivery technologies, let’s look at providers in San Pablo.

Determining who provides service in a given area is not always a simple task. We use two primary sources to identify available service providers: TestMy.Net (http://testmy.net/) and the California Broadband map (http://www.broadbandmap.ca.gov/map/). We also spoke with residents and businesses to get a subjective feel for the validity of the data we collected.

2.3.2.1 TestMy.Net TestMy.Net is a speed test site that identifies the registered owner of the IP address running the test.

Using TestMy.Net, we find 14 Internet service providers offering service in San Pablo:

 ATT Internet (DSL and some fiber to  ATT Services (DSL and some fiber to the businesses) businesses)

23 Broadband Communities. “What Fiber Can Do For Your Community.” Fall 2014. Viewed at http://bbcmag.com/Primers/BBC_Nov14_Primer.pdf.

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 ATT U Verse (fiber to the node and DSL  Lawrence Berkeley from the node)  Level 3 (Fiber)  California State  SBC Internet  CenturyLink  Sprint PCS (cellular)  Comcast Business (DOCSIS and some fiber)  Telepacific  Comcast Cable (DOCSIS)  Verizon Wireless (cellular)  Contra Costa County

Regardless of the number of providers identified by TestMy.Net in the City, Comcast owns a significant market share. Based on data collected in July of 2015, Comcast provides service to 73% of Internet subscribers in the City. AT&T provides service to 24% of subscribers and all other providers offer service to just 3% of subscribers.

Figure 15: Internet Service Provider Market Share (based on TestMy.Net data)

Interestingly, SRI’s market survey exposes an element of broadband utilization that the TestMy.Net data do not show. The survey data suggest a significant portion (19%) of residents connect via a free WiFi solution.

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Internet Access Technology Other 8%

Cable Modem Free WiFi (Comcast) 19% 35%

DSL (AT&T) 38%

Figure 16: Market Survey Internet Access Technology Results

This free WiFi may be, in part, the XFINITY hot spots Comcast has built through the community. In this case, the TestMy.Net data would report these connections as Comcast connections.

2.3.2.2 California Broadband Map The California broadband map relies on service provider reporting to indicate who provides service where.

Reviewing the California Broadband map we found three fixed providers, five mobile, and four satellite.

 Fixed Fixed services can be fixed wireless or wireline services like DSL, DOCSIS, or fiber. We found no fixed wireless providers in San Pablo.

o AT&T California

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Maximum Advertised Downstream Greater than or equal to 10 mbps and less Speed: than 25 mbps Greater than or equal to 1.5 mbps and Maximum Advertised Upstream Speed: less than 3 mbps Technology Type: Asymmetric xDSL

Contact: http://www.att.com

o Comcast

Maximum Advertised Downstream Greater than or equal to 100 mbps and Speed: less than 1 gbps Greater than or equal to 25 mbps and less Maximum Advertised Upstream Speed: than 50 mbps Technology Type: Cable Modem - DOCSIS 3.0 Down

Contact: http://www.comcast.com

o Megapath

Maximum Advertised Downstream Greater than or equal to 10 mbps and less Speed: than 25 mbps Greater than or equal to 10 mbps and less Maximum Advertised Upstream Speed: than 25 mbps Technology Type: Other Copper Wireline

Contact: http://www.megapath.com

 Mobile Mobile or cellular service providers often offer data packages. These packages can sometimes be quite useful – especially for mobility. However, they usually cost more per Mbps than fixed services and often come with data usage caps. Finally, while subscribers can “tether” devices to a mobile cellular service, most mobile cellular service is accessed using a smart phone or some other alternative network access device. Consuming the Internet through a smart phone is

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much like doing your grocery shopping at a convenience store; you will end up paying more for a lower quality diet.

o AT&T Mobility

Maximum Advertised Downstream Greater than or equal to 10 mbps and less Speed: than 25 mbps Greater than or equal to 3 mbps and less Maximum Advertised Upstream Speed: than 6 mbps Technology Type: Terrestrial Mobile Wireless

Contact: http://www.att.com/shop/wireless

o MetroPCS NOTE: MetroPCS is a pre-paid company owned, in whole, by T-Mobile and operating on the T-Mobile network. Nonetheless, the California broadband map lists MetroPCS as a separate carrier.

Maximum Advertised Downstream Greater than or equal to 768 kbps and less Speed: than 1.5 mbps Greater than 200 kbps and less than 768 Maximum Advertised Upstream Speed: kbps Technology Type: Terrestrial Mobile Wireless

Contact: http://www.metropcs.com

o Sprint

Maximum Advertised Downstream Greater than or equal to 6 mbps and less Speed: than 10 mbps Greater than or equal to 1.5 mbps and Maximum Advertised Upstream Speed: less than 3 mbps

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Technology Type: Terrestrial Mobile Wireless

Contact: http://www.sprint.com

o T-Mobile

Maximum Advertised Downstream Greater than or equal to 10 mbps and less Speed: than 25 mbps Greater than or equal to 6 mbps and less Maximum Advertised Upstream Speed: than 10 mbps Technology Type: Terrestrial Mobile Wireless

Contact: http://www.t-mobile.com

o Verizon Wireless

Contact: http://www.verizonwireless.com

 Satellite Satellite subscribers receive service from a satellite and a dish. Satellite service is characterized by fairly good bandwidth but very high latency. Typically, satellite services have draconian usage caps. It is rare that subscribers in an urban environment with other alternatives will use satellite services.

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o Hughes.Net

Contact: http://www.hughesnet.com

o Skycasters

Maximum Advertised Downstream Greater than or equal to 6 mbps and less Speed: than 10 mbps Greater than or equal to 1.5 mbps and Maximum Advertised Upstream Speed: less than 3 mbps Technology Type: Satellite

Contact: http://www.skycasters.com

o Starband

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Contact: http://www.starband.com

o ViaSat Communications

Contact: http://www.viasat.com

There may be other companies providing Internet services in San Pablo. Some companies do not report to the broadband mapping team and others may be reselling another provider’s bandwidth.

2.3.3 TestMy.Net Data A look at average speeds from the TestMy.Net data for AT&T and Comcast over time, suggests Comcast provides a better product than AT&T and that Comcast continues to improve its product at a faster pace than AT&T.

70.00

60.00

50.00

40.00

30.00

20.00

10.00

0.00

Att Internet Att U Verse Comcast Cable Average

Figure 17: Average Download Speeds over Time (based on TestMy.Net data)

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The data suggest Comcast made data improvements in the first quarter of 2013 and again in the fourth quarter of 2014. Based on advertising beginning in June of 2015, Comcast can now offer multi-Gbps service to residential addresses in the City.

These data speeds place San Pablo in the top half of cities in Contra Costa County.

Contra Costa County

Pittsburg Orinda Danville Pinole Martinez Pleasant Hill Hercules San Pablo San Ramon Brentwood Walnut Creek United States Lafayette El Cerrito Concord Moraga Richmond Clayton Antioch Oakley

0 10 20 30 40 50 60 70 80

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Figure 18: San Pablo Data Speeds Compared with Contra Costa County Cities

San Pablo ranks at the middle of U.S. cities of similar size.

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Similar Sized Cities

Leander, TX Liberty, MO Burlingame, CA Sherwood, AR Port Huron, MI San Pablo United States Marion, IN Rochester, NH Statesboro, GA Kent, OH North Chicago, IL

0 10 20 30 40 50 60 70

Upload Download

Figure 19: San Pablo Data Speeds Compared to U.S. Cities of Similar Size

As broadband development continues, the fastest cities in the U.S. constantly shift. The city with the fastest average download speeds in the U.S., based on July of 2015 TestMy.Net data, was Saratoga, California. San Pablo’s 38.1 Mbps average download speed is only 17% of Saratoga’s 221.1 Mbps average.

2.3.4 Ookla Data Ookla has been collecting speed test data through its Speedtest.net site since 2006. Ookla presents this data through netindex.com and the netindex explorer at explorer.netindex.com.

According to Ookla’s data, as of July 2015, the average connection speed in the U.S. was 38.8/12.6 Mbps. California was doing somewhat better than the nation with average speeds of 43.5/10.0 Mbps. This places California 7th in the nation. San Pablo ranks 196th of 492 California cities with download speeds averaging 45.1 Mbps.

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2.3.5 Pricing We looked at AT&T’s and Comcast’s web pages to get an idea of pricing.

AT&T

Comcast XFINITY

Nationally, the average monthly bill for Internet connectivity for data packages with between 15 and 25 Mbps download speeds is $59.40.24 San Pablo residents pay comparable prices to the U.S. average. Average prices per Mbps in the U.S. are $8.54 for DSL, $2.03 for cable, and $1.54 for fiber. San Pablo does not currently have a fiber option. At higher monthly cost/higher bandwidth packages, residents of the city can beat national Mbps pricing. To do so, they must either buy a $57 per month Max package from AT&T or better, or a $64.95 per month Performance package from Comcast or better.

2.4 Current State Summary In sum, our evaluation of the current state of broadband in San Pablo is that broadband services are comparable to national trends. However, this “average” standing is inadequate to meet the City’s policy objectives.

24 https://apps.fcc.gov/edocs_public/attachmatch/DA-15-132A1.pdf.

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3 Development Options

3.1 Principles Like a Rubik's cube, the multitude of concerns inherent in public broadband projects are interrelated in a complex fashion: business modeling, financing, cash flow forecasting, legal issues, public relations, technology, maintenance, operations, and other “sides” of the cube all have solutions – both short-term and long-term – that are interdependent. To simultaneously resolve each of these needs in a manner that satisfies San Pablo’s policy objectives requires that they be addressed under a common set of goals or "guiding principles". Trying to solve one issue without consideration of the others – in absentia of guiding principles – may leave planners with a superficially pleasing one-sided solution while the remainder of the puzzle remains jumbled. An analogy may help illustrates the concept of an open and wholesale network: When cities realize the need to build a Careful consideration and the experience of our municipal airport, they often form an Airport Authority. That multiple partners yields four key guiding organization exists for the sole purpose of building and principles as criteria for public broadband operating the municipal airport. The Authority builds runways solution selection: and structures, but it does not fly the airplanes. Instead, private airlines use the infrastructure and compete for retail ticket  A public solution must be open access sales. Because the high cost of the airport is spread over and offer wholesale services to all multiple airlines using the facility, the cost to use the airport qualifying service providers; it must be becomes much lower than if each airline had to build its own open and wholesale. airport.  A public solution must offer carrier-class When an airline sells tickets to passengers, the cost of the ticket security, functionality, and reliability. covers runway fees, gate fees, and other costs which the Airport  A public solution must offer high Authority assesses airlines for use of the airport. These fees scalable bandwidth. operate the airport and pay the debt used to finance its  A public solution must be based upon an construction. The Airport Authority does not interact directly open and independent architecture. with passengers - it does not charge the passengers fees, nor does it consider them customers. Instead, the airlines are the 3.1.1 Open and Wholesale Authority’s customers. The arrangement allows the airlines to It goes without saying that monopolization is compete against each other, not against the Airport Authority. anathema to competition. Evidence suggests This competition helps airlines focus on things like value and services rather than on maintenance of the airport. This that monopoly and duopoly constraints have benefits customers because airlines become innovative in their played a large role in creating the average approaches to win and keep customers. broadband environment San Pablo has today. If monopoly business models are responsible for (continued)

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October 14, 2015 SAN PABLO BROADBAND PLANNING the inadequate current state, it simply makes no sense for municipalities to trade one monopoly (the regulated private monopoly) for another (a Similarly, in the public open access network model, public sector monopoly) by deploying a closed municipalities build and maintain the broadband broadband infrastructure. Philosophically, cities infrastructure, but they do not engage in selling services to should be averse to deploying a monopoly the end-user. Rather, they open the infrastructure to private system and should shun the idea of delivering service providers. Ideally, multiple service providers compete services themselves. Rather, they should with each other for market share. It is they who become the perceive for themselves a more traditional customers of the municipal network owners. In this model, municipal role – providing infrastructure. The the private sector still owns the relationship with the end- actual delivery of services should be left to user subscribers and, being freed from concerns about competing private service providers – as many maintaining the infrastructure, they are able to focus on their as are qualified to serve the market. This model service offerings. This stimulates innovation as providers seek to differentiate themselves from one another and it ensures that a publicly-owned infrastructure is helps ensure that prices remain at an appropriate made available to a wide variety of competing competition driven market level. Additionally, since private firms for the delivery of goods and government financing for the network can secure lower services. interest rates and longer terms than private industry can, the cost of debt service is lower than what it would be for private While this open and wholesale model seems to network infrastructure deployment. These cost savings fit logically with the traditional role of benefit the service providers who end up paying lower access governments, it is not one that is regularly fees. Because their overhead is lower, service providers can adhered to. Masha Zager, Editor of Broadband price their services at lower retail rates or use free revenue Communities Magazine, compiled a list of 135 for research and development, thus benefiting the end user. municipal projects in the May/June 2013 issue When a community realizes they need an airport to stimulate (see http://www.bbpmag.com/2013mags/may- economic development and improve quality of life, they june/BBC_May13_MunicipalNetworks.pdf). In don’t call up the airline and ask them to please build runways Zager’s list, only 34 of the 135 projects are in their town. Rather, they build an airport. When a designed to support multiple competing service community recognizes the need for improved broadband to providers. Arguments for pursuing a vertically achieve the same objectives, they shouldn’t be forced to call integrated model usually revolve around the the private network owners and try to get them to meet financial implications of a wholesale/retail split. public policy objectives. Rather, they may need to build a As the argument goes, price differentiation network. opportunities are limited in a wholesale model so the network owner has little maneuvering capability to compensate for revenue shortfalls. Further, the argument continues, the inefficiencies associated with multiple organizations running the same business consume too much of the thin margins available. However, Anupam Banerjee and Marvin Sirbu of Carnegie Mellon University demonstrated these arguments are invalid. In their 2006 paper, “FTTP Industry Structure: Implications of a Wholesale Retail Split” (http://repository.cmu.edu/tepper/447), they conclude:

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In spite of interfering with a wholesaler’s ability to price discriminate, a wholesale-retail split is economically feasible. A wholesaler can recover its cost and as long as a significant number of homes do not have a zero willingness to pay for broadband data service, a wholesaler is almost as profitable as a vertically integrated entity.

Changing the broadband delivery model from one that favors current naturally monopoly players to one that enables competition seems like an important policy objective. Implementing a model that allows for a wholesale/retail split, a model that separates the natural monopoly element of broadband delivery from the competitive aspects of the services, is a core principle guiding municipal broadband selection.

3.1.2 “Carrier-Class” “Carrier-class” is a fairly vague term. The PC Magazine online encyclopedia defines it as “…hardware and software used in large, high-speed networks. It implies extremely reliable, well tested and proven. Telephone companies, major ISPs, and large enterprises purchase carrier-class equipment."25 In their 2007 article “Carrier-Grade: Five Nines, the Myth and the Reality”, Wedge Greene and Barbara Lancaster conclude, “Carrier-grade is actually an intangible expectation and explicit promise that the equipment vendors will provide the best equipment possible and a clear, immediate communication of issues related to equipment. And that service providers will also provide the best network possible to their customers and keep a clear and immediate communication channel open concerning service impacting situations. And lastly that the supply chain communication is two-way, with feedback from the buyer going to the provider so they gauge and support continuous improvement.”26 Brocade Networks’ 2009 article “What is Carrier Grade Ethernet”27 helps refine the overall understanding of what a carrier grade network is (Brocade Networks’ focus is on Ethernet which proves to be relevant as 21st century networks tend to be packet based Ethernet or Ethernet-like networks) by defining five attributes carrier-grade Ethernet must possess: (1) standardized services, (2) scalability, (3) reliability, (4) quality of service, and (5) service management. In a 2001 white paper titled, “Carrier-Class Ethernet: A Services Definition”,28 Appian Communications defines carrier-class Ethernet around the services the network can deliver – especially: (a) granular, SLA-managed bandwidth guarantees, (b) rapid, even on demand, service activation, (c) SONET/SDH resilience and manageability, (d) services that span the metro and wide area, (e) high-speed migration for current data services, (f) a simple strategy to sell new and more services, (g) integration with existing TDM services, and (h) greatly reduced operating and capital costs. The fundamental driver underlying each of Appian Communications’ services is the ability of service providers to increase revenues by reliably offering new packet driven services, while simultaneously controlling costs.

25 http://www.pcmag.com/encyclopedia_term/0,1237,t=carrier+class&i=39298,00.asp 26 Greene, Wedge and Barbara Lancaster (18 March 2007). “Carrier-Grade: Five Nines, the Myth and the Reality.” LTC International – published in Pipeline Magazine in April 2007. 27 Brocade Communications Services (2009). “What is Carrier Grade Ethernet?” Brocade Communications Systems. 28 Appian Communications (2001). “Carrier-Class Ethernet: A Services Definition.” Appian Communications White Paper.

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Fundamentally, carrier-class suggests those attributes required to enable a service provider to offer customers reliable professional services. These are the attributes that Wedge and Lancaster call “intangible” and that Brocade Networks and Appian Communications try to enumerate. These attributes have to do with reliability, capacity, security, flexibility, and other features expected by service providers from the network that will serve as their transport platform. Service providers require the network to perform with carrier-class attributes. From the smallest start-up to global giants with international reputations, each is willing to entrust those reputations to the network only if they are confident the network meets carrier-class expectations. From the physical design to the operational model, the network must deliver exceptional performance and offer absolute security.

So, while “carrier-class” may not be easily defined or readily measured, it is an obvious guiding principle for municipal open access network projects.

This requirement, though seemingly obvious, is sustained as a guiding principle through market research. Scientifically administered surveys (including SRI surveys) have been used to determine the characteristics required for municipal networks to see market success. In nearly every case, the number one or two concern for businesses and residents alike is “reliability”; the other is “speed”.

3.1.3 High Scalable Bandwidth To address the first two principles, municipal networks must meet the carrier-class demands of multiple service providers simultaneously. In other words, they have to be capable of reliably and securely delivering all the current services available as well as higher-bandwidth consuming future services from all service providers on the network. Thus, the system has to start out with tremendous bandwidth capacity and be able to grow larger still. In a way, this is a requirement to make the system "future proof," meaning that it is capable of adapting to new and emerging technologies that otherwise might obsolesce the investment.

The value of incorporating this principle is obvious. Just as "whistle stop" communities had an advantage over those bypassed by the railroad in the old west, cities with the ability to support multiple current and future services will have economic as well as quality-of-life advantages over other communities. Further, this principle ensures that the investment made today won't become outdated. The system must be designed to scale to meet future demands.

Many incumbents argue that the bandwidth they provide is more than adequate and, that as soon as the market demands it be done, they will upgrade their services. This argument sounds like the one Henry Ford made when he said of the Model-T in 1909, “Any customer can have a car painted any color that he wants so long as it is black.” More germane to the current discussion is the flood of telephone styles that came to market after AT&T abandoned their telephone device monopoly. Prior to allowing competing handsets, AT&T claimed that the market did not demand anything other than the traditional black cradle phone. In the case of bandwidth, like with colors of automobiles and styles of phones, greater availability creates greater demand.

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What allegorical black Model-T’s and cradle phones are today’s equivalents of Henry Ford and AT&T offering U.S. broadband customers and residents and businesses in San Pablo?

The OECD compares international advertised download speeds among 34 member countries. As “Figure 20: Average Advertised Broadband Download Speed by Country” shows, the OECD 2011 international broadband speed comparison puts the US, with its average advertised download speeds of 27.6 Mbps, at a poor 19th place.

Average advertised broadband download speed, by country, kbit/s, September 2011 160 000

140 000 Average advertised broadband download speed, kbit/s* Median 120 000

100 000

80 000

60 000

40 000

20 000

Figure 20: Average Advertised Broadband Download Speed by Country

We have already discussed the inadequacy of the current state of broadband in San Pablo. The City deserves better than a cradle phone; the City deserves more options than black.

3.1.4 Open and Independent Architecture While many proprietary solutions could be employed to deliver the first three principles, this fourth principle aims at ensuring that the efficiencies of the system are always maximized. By requiring solutions to be standards-based and founded on open technologies, municipal open access network owners can "shop around" for the best deals and are not beholden to any one particular company or proprietary invention. While there is sometimes benefit to a proprietary solution that can outweigh the negatives of diminished choices, the ultimate benefits usually derive from vendors who are actively competing for business and responding to competition with efficient pricing and more innovative solutions.

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3.2 Solutions There are many options that may lead to broadband solutions that meet San Pablo’s policy objectives and that adhere to the guiding principles. In “Municipal Options for Fiber Deployment,” the Blandin Foundation explores eleven municipal fiber deployment models ranging from enticing the private sector to invest to iterations where the municipality builds and operates a competitive network.29

Considerations Option Ease of Entry Financial Political Examples Municipal Utility Necessary to hire Total financial Where local Windom MN Retail – City entity expertise in commitment, total government has a www.windomnet.com finances, constructs, telecom planning, financial control. positive service Burlington VT operates and retails construction, Opportunity to reputation, this can www.burlingtontelecom.net operations, gain positive cash be the easiest telecommunications Baldwin, WI, marketing, billing. flow to support approach. Quality services Some municipal private sector www.baldwin‐telecom.net municipalities government partner may reduce Reedsburg, WI Power Utility leverage the operations. opposition from www.reedsburgutility.com facilities, financing skeptics who Spencer, IA and expertise of a believe technology www.smunet.net municipal electric is too sophisticated Bristol TN utility. and/or dynamic. www.btes.net Municipal Utility Relatively simple Fiber network is This strategy Chaska, MN providing fiber to construct and often a good provides www.chaskamn.com services to large operate. City investment for operational savings Bowling Green, KY customers only – could choose to connecting public to public sector, www.bgmu.com provide Internet sector buildings. plus is seen as a government, access or access to Depending on high‐level schools, large dark fiber. required build, economic business added cost may development not be significant, strategy to lower Power Utility especially with the costs of larger quality planning. employers and tech‐oriented companies. Joint Venture – City Joint powers Adequate Multiple providers UTOPIA – Utah. finances the board sells bonds, revenues from ensure choice. City www.utopianet.org network with a hires wholesale providers required loses marketing privates sector operator who to pay bonds. power of municipal recruits retailers. utility. entity serving as a City role is wholesale provider generally limited to multiple retail to financing. providers

Public-Private Partnership

29 Blandin Foundation (unknown). “Municipal Options for Fiber Deployment.” http://www.blandinfoundation.org/_uls/resources/Municipal_Options_final.pdf.

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Considerations Option Ease of Entry Financial Political Examples Joint Venture – Complexities in Reliance on Single provider East Central Vermont FiberNet Network financed negotiating partner to operate limits choice; www.ecfiber.net through capital partnership the network and responsibilities for lease with leasing agreements. City sell services service and escapes need to adequate to retire performance are company owning create its own the debt and clear. Overcoming the network until operating entity. maintain / financial difficulties leases are paid. upgrade the may be difficult w/ Non‐profit provider network. weak financial as operator partner.

Public-Private Partnership Private Sector Collaboration Brainerd Public Reduced school Brainerd Baxter MN with CTC Entrant – Public between Brainerd sector financial technology costs as provider sector entices a School district CTC liability is limited are a winner. Third www.ctctelecom.net private sector enabling new fiber to school wired provider Hiawatha Broadband in ring for the school technology bond. enhances the Wabasha and St. Charles provider to enter district and FTTP Limited financial competitive www.hbci.com the market. City deployment by incentives. environment. Lack Fort Wayne IN may provide CTC. Atypical Verizon of public control on www.verizon.com/fios financing incentives, Aggressive investment in services offered, ease or remove recruiting by older community prices, etc. barriers such as Wabasha and St. at no cost to Fort Big win for the Fort ROW fees or Charles. Wayne. Wayne mayor and permitting, or serve Fort Wayne leadership in as anchor tenant convinced Verizon Wabasha and St. to deploy FIOS by Charles. (possibly with other linking economic entities, like development schools, hospital, strategies to large business) technology and by reducing barriers. Changing the Equation Municipality and City and seven Need a few well No ongoing public St Joe Valley Network, South major local major institutions capitalized funding or liability; Bend, IN institutions build / businesses institutions; in city paid for their www.stjoevalleymetronet.org dark fiber network finance the initial South Bend these portion of the fiber build and founder network through which is then leased point of presence institutions have right of ways and to any entity that as founder realized achieved savings in annual wishes to use it‐ members; dark large annual telecom budget. private or public fiber leased to savings in telecom public and private budgets by being Public-Private entities. founder members. Partnership

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Considerations Option Ease of Entry Financial Political Examples Municipality or Similar to the Regional area can Where strong Leesburg FL – Lake County FL Regional authority Municipal Utility spread cost opposition to www.leesburgflorida.gov alone builds dark noted above, but among many government action Development Authority of the fiber infrastructure done on a larger, economic exists, yet North Country, NY regional base with opportunities. economic www.danc.org/oatn.html and leases to local specific intent development is business or for toward economic critical, this public interconnect development. approach can serve a middle ground. Power Utility County or regional Scott County used Counties are able County or regional Scott County, MN government built public funds offset to proceed based governments can (Recently built network fiber infrastructure by existing private on county, build fiber designed for multi‐sector use) for public sector carrier costs to link municipal, and networks to serve www.co.scott.mn.us all municipalities school district public sector needs Dakota County, MN uses including and school costs and service to achieve (expanding network, with government and districts. needs with significant public expanded uses under education; Additional fiber in possible future sector cost savings. consideration) additional capacity conduit may be offsets from Policy decisions www.co.dakota.mn.us may be available for made available for localities and about opening this private sector use public or private business. infrastructure to uses. Dakota private sector users Power Utility County network can be a separate built incrementally discussion. by connecting county buildings and linking with other public sector networks. City builds Powell has issued City only needs to City must Powell, Wyoming infrastructure; bonds for building finance the fiber renegotiate www.cityofpowell.com private operator a fiber outside plant contract with purchases infrastructure as construction. network operator community every 15 years. electronics and infrastructure; US operates the Metronets will network for 15 operate the years, providing all network providing retail services retail services to the town. Public-Private Partnership Private non‐profit Entry City becomes No City OneCommunity, Cleveland, OH sector begins fiber considerations anchor tenant and involvement www.onecleveland.org infrastructure and involve persuasion financial initially, other than later adds public only, initial contributor later. organization and investment is encouragement. bodies as partners borne by non‐ profit sector. Public-Private Partnership

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Considerations Option Ease of Entry Financial Political Examples Local government Developers build Little or no cost to The costs of the Loma Linda, CA requires developers this cost into the the city as the expanded network www.ci.loma‐linda.ca.us to install fiber to the price of lots and network and are paid by new home through housing. City community grow users. benefits from at the same pace. subdivision and growing network. Small cost passed development This process is on to end user / ordinances. most suitable to home buyer. Telecommunications growing infrastructure is communities. treated in the same way as sewer, water and local streets

Changing the Equation Table 10: Blandin Foundation Municipal Options for Fiber Deployment

Each of the options described by Blandin may have some appeal for San Pablo. Of course, other mechanisms besides municipal entry and other technologies besides fiber exist for improving broadband. We are going to focus on four broad categories available to the City:

 Status Quo Development Status quo development pursues a municipal broadband development model of working with the incumbent providers to reach the City’s broadband development policy objectives. Unfortunately, to date, the status quo has not met the City’s objectives. Furthermore, dependence on the status quo cedes the possibility of realizing policy objectives to the City’s private sector partners.

 “Changing the Equation” Model Blair Levin was the program manager responsible for developing the National Broadband Plan. For the last several years, Levin has been arguing that we need to “change the equation” and make it more economical for private companies to develop advanced broadband solutions in our communities. In the Levin model, a community identifies assets it has available (including buying power). The community documents its assets and presents them to the marketplace. By providing assets, the community reduces the costs of broadband development and increases the likelihood that a private provider will build. The Levin model reduces the community role to owning a small set of assets that are leased or deeded to a private provider, who will then use those assets to develop broadband solutions. The private provider owns other network assets, provides operation and management, and offers retail services.

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 Power Utility Model The power utility model has been most successful in communities that own and operate their own power utility like Lafayette, Louisiana or Chattanooga, Tennessee. These communities have used revenue bonds to borrow the money needed to build fiber networks. They then operate and manage these networks and provide retail services.

 Public-Private Partnership Model In the public-private partnership model, the public partner retains ownership of the broadband assets asset. The asset is made available to multiple competing retail service providers. The network owner can provide network operations and management can outsource operational functions to a third party asset manager or network operator.

3.2.1 Status Quo Broadband capacity, reliability, and price have been improving in the City over time. The City should carefully consider if current progress adequately meets its policy objectives. The City must also consider any impact any action on it might have on the course of current progress.

In other instances where local governments have taken action to improve broadband, incumbent providers have argued that government action – whether that action is regulation or some level of government entry into the broadband marketplace or some other government action – throttles their will to innovate, represents unfair competition, discourages capital investment, and plays against free market efficiencies. While incumbent providers have made these arguments, their reactions to competitive entry into their markets has been varied. AT&T began aggressively improving its network when Google announced they would build in San Antonio, Texas. The current offering from Comcast of 2 Gbps service in the Bay Area can be considered a response to competition.

3.2.1.1 Status Quo Evaluation  Open and Wholesale Unbundling requirements give AT&T’s network some characteristics of an open and wholesale network allowing entry of providers like MegaPath. Comcast’s network is closed.  Carrier-Class AT&T offers a carrier-class network. Comcast has made significant advances in developing carrier-class modifications to their network. However, the basic nature of DOCSIS as a distribution technology and the shared nature of the transport medium are not carrier-class.  High Scalable Bandwidth AT&T and Comcast both offer high scalable bandwidth to limited areas within the City.  Open and Independent Architecture AT&T and Comcast both use a mix of proprietary equipment and open standards infrastructure.  Alignment with Policy Objectives

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As a private company, AT&T must first address shareholder value. Sometimes shareholder value aligns with public policy objectives, but often it does not.

In sum, the status quo does not meet the City of San Pablo’s objectives.

3.2.2 Changing the Equation Local governments are often looking for low-risk options for expanding broadband access to residents and local businesses. Aggressively courting local private incumbents will do little to alleviate the broadband monopoly/duopoly, but many communities have been able to affect significant policy changes through negotiations with their existing private enterprise partners. Municipalities have various incentives available to them as they court private enterprise carriers. Local government contracts are fairly lucrative for incumbent providers. To help encourage local providers to expand service, municipalities can pay for service to additional locations, order services that incent infrastructure upgrades that can reasonably be extended to other entities, place conditions on their contracts with their providers, or use other means of influence.

Blair Levin, former Chief of Staff to FCC chair Reed Hundt30 and executive director for the effort that produced the National Broadband Plan and current director of Gig.U,31 does an effective job of describing what he sees as the root of the broadband problem and of suggesting the value of broadband friendly policies toward fixing it (See http://www.gig-u.org/). First, Levin declares, “…current market forces will not drive deployment of world leading wireline networks in the United States. For the first time since the mass market Internet, there is not a national wireline carrier with plans to broadly deploy a better network than the current best available network.”

This is not because we have reached a balance between network benefits and investment. Levin points out that the total benefits of high speed networks are the sum of benefits to the investor(s) in the network, content and applications, the local community, the region, and the country. However, the only benefit accrual that drives investment is the benefit to the investor. For the investor, Levin sees an equation that looks something like:

30 Hundt was FCC Chairman from 1993-1997. 31 See http://www.gig-u.org/.

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Figure 21: Broadband Investor Return on Investment Formula

Where:

 C – Capital Expenditures  O– Operating Expenditures  r – Risk  R- Revenues  SB- System Benefits (Benefits that drive increased revenues outside the communities where the new or incremental investments are made.)  CL- Losses due to competition (Note this is a negative value. Increasing a decrease in competitive losses results in a positive impact for the investor.)

To attract new broadband investment, communities (or regions, or the nation) must “change the math” by reducing costs and risks and increasing benefits.

Figure 22: Change the Broadband Math

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“Historically,” Levin argues, “investments are made when policy – generally with federal leadership – alters [the] equation.”

Sector Comp. Ecosystem change CapEx OpEx Risk Revenue /opportunity Losses Telco Grant of monopoly Lower Raise Cable Grant of monopoly, pole attachment law, compulsory Lower Raise broadcast license Rural areas USF Lower Lower Wireless Limited # of licenses Lower DBS Limited # of licenses, Lower Raise program access Broadband Deregulation, two wire policy Raise Raise Upgrade Wireless More licenses, lowered TAC, Lower Raise Raise Upgrade oversight of siting authority Broadcast Television Provide 2nd channel for Lower Lower Raise Digital transmission of content Transition Kansas City Deals with City, State, and Lower Lower Lower Raise Raise Google Fiber Utilities Table 11: Historic Infrastructure Deployment Friendly Policies

Without waiting for federal leadership, communities can work to change the equation.

3.2.2.1 Become a “Broadband Friendly” Community In May of 2013, the Fiber to the Home Council (http://www.ftthcouncil.org/) produced a report called “Becoming a Fiber-Friendly Community: Regulatory and Infrastructure Actions that can Drive Deployments”32 designed to provide a guide to how local jurisdictions can “change the equation”. These guidelines are similar to the guidance Google gives communities as they prepare to work together to deploy Google fiber.

The following discussion is based on the Fiber to the Home Council report with modifications to make it more relevant to improving broadband in San Pablo. The Fiber to the Home Council presents fourteen recommendations in four categories:

32 Fiber to the Home Council (May 2013). “Becoming a Fiber-Friendly Community: Regulatory and Infrastructure Actions that can Drive Deployments.” Fiber to the Home Council. http://www.ftthcouncil.org/p/bl/et/blogaid=214&source=1.

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Community and Local •Develop a clear broadband plan. Government •Ensure commitment of community stakeholders, including Leadership local government personnel. and Support

Approval •Define an expiditious process for on-going permitting and inspections. Requirements •Permit innovative construction techniques. and Premitting •Build out requirements have been proven conterproductive.

•Publish data about existing infrastructure. •Make all rights-of-way available on clearly defined reasonalble terms through a rapid approval process. •Make poles available on clearly defined, reasonable terms Use of Existing through a rapid approval process. Infrastructure •Ensure make-ready work is performed expeditiously. •Coordinate all pole maintenance and make-ready work. •Allow prospective attachers to perform all make-ready work themselves through contractors.

Proactively •Provide space on all poles for new attachers. Improving •Install ubiquitous fiber conduit. Existing •Use building codes and community development plans to Infrastructure drive fiber deployments.

Figure 23: Becoming a Fiber-Friendly Community

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Communities across the country understand the great value of expanding broadband capacity and availability and are exploring how they can encourage infrastructure investments to support real broadband. A wide range of factors drive private network owners’ decisions to invest in new broadband infrastructure, from the cost of construction and operation to demand for service. Importantly, some key factors are within the control of a community, such as accessing public rights-of-way and government-owned facilities and receiving government permissions. The Federal Communications Commission (FCC) estimates these factors may amount of 20% of the total deployment cost. In other words, a community can make a real difference in whether a network gets built.

In the following, we outline a series of steps that communities should consider to clear a path for and work with a prospective broadband provider. It is not exhaustive, and some of the steps require cooperation from other private and public actors to achieve. Further, the trade-offs among competing objectives and degree of difficulty in finding solutions will vary among communities. Nonetheless, these steps have the potential to meaningfully reduce deployment costs and tip the balance in favor of new broadband network investment.

3.2.2.1.1 Community and Local Government Leadership and Support From initial conception to contract negotiations to construction and operation of the network, community leadership – from government officials, community leaders, and business owners – can play a crucial role in the process of steering broadband improvements.

In the “Community and Local Government Leadership and Support” category, the Fiber to the Home Council has two recommendations:

1. Develop a clear broadband plan, and 2. Ensure commitment of community stakeholders, including local government personnel.

3.2.2.1.1.1 Develop a Clear Broadband Plan Improving broadband is a critical step enabling communities to participate fully in the rapidly evolving Internet economy. Like other major community infrastructure projects, broadband networks represent a major undertaking, with large costs incurred up front prior to any service being provided or revenues being generated. As such, communities’ need to have a clear vision about the nature of the undertaking and, once committed, develop a culture to support this effort – one that will last as community leadership changes over time and unexpected circumstances arise.

A crucial part of any community plan is to define the community’s intended investment and involvement, to set realistic goals and expectations for the project, and to create measures for those goals.

The plan, for instance, should discuss how the community will directly benefit from broadband expansion, including connectivity and use of the network at public institutions. The plan may also consider how individual’s use at home can improve access to and use of relevant civic services. Real benefit to the community may be hard to measure, especially in the early stages of broadband

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October 14, 2015 SAN PABLO BROADBAND PLANNING expansion. Defining the expected community benefit, measuring progress towards achieving that benefit, and advertising successes will help retain community stakeholder support.

3.2.2.1.1.2 Ensure Commitment of Community Stakeholders It is essential to have key community stakeholders, especially local government decision-makers and relevant personnel, engaged with the broadband expansion project. By bringing the school district, key medical providers, and other entities together with the town and working together, the community’s anchor institutions improve broadband for all. Appointing a single government official as point of contact responsible for all aspects of the broadband development is one way to facilitate the process.

3.2.2.1.2 Approval Requirements and Permitting There are various permitting and approval processes required to implement new broadband infrastructure. When middle mile infrastructure investments are required or when crossing interstate highways or crossing state roads to improve broadband, the state and federal government may play a more prominent role. However, San Pablo governs within its jurisdiction. Any approval process needs to have reasonable substantive requirements and be completed expeditiously. In addition, comprehensive approval for an entire project, instead of repeated approval requirements for different stages of a project, greatly reduces delays that add costs to a project.

In the “Approval Requirements and Permitting” category, the Fiber to the Home Council has three recommendations:

1. Define an expeditious process for on-going permitting and inspections, 2. Permit innovative construction techniques, and 3. Build out requirements have been proven counterproductive.

3.2.2.1.2.1 Permitting and Inspection Processes All applications for permits should have a guaranteed response deadline – preferably no more than five business days. Along with providing a dedicated inspection team, local governments should allow providers to work with a pre-approved, third-party inspection team to review all work in a timely manner.

3.2.2.1.2.2 Permit Innovative Construction Techniques Providers are constantly developing new technologies that speed deployment, minimize disruption to ongoing activities and reduce any costs for local governments. Microtrenching (described later in this report) is an example of these innovations and is currently permitted in many areas. Local governments should be open to permitting expeditious use of such new techniques.

3.2.2.1.2.3 Build Out Requirement Relief The Fiber to the Home Council believes imposing “must build” requirements on a new entrant in a market has proven counterproductive to new builds and has been seen by federal and state agencies as anti-competitive, because they end up making new entrant projects uneconomical thus entrenching incumbent providers. As such, local governments should consider offering new entrants relief from

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SAN PABLO BROADBAND PLANNING October 14, 2015 must-build requirements. This does not mean that communities should set aside legitimate concerns about ensuring access is provided ubiquitously. Rather, local governments should work with providers on alternative, more flexible ways to ensure access reaches customers who want service.

3.2.2.1.3 Use of Existing Infrastructure The ability to access existing infrastructure can dramatically reduce the costs of expanding broadband. It is crucial to ensure all prospective providers can secure rapid and uninterrupted access to this infrastructure at a reasonable and predictable cost in a timely manner.

In the “Use of Existing Infrastructure” category, the Fiber to the Home Council has six recommendations:

1. Publish data about existing infrastructure, 2. Make all rights-of-way available on clearly defined, reasonable terms through a rabid approval process, 3. Make poles available on clearly defined, reasonable terms through a rapid approval process, 4. Ensure make-ready work is performed expeditiously, 5. Coordinate all pole maintenance and make-ready work with the new provider to save costs, and 6. Allow prospective attachers to perform all make-ready work themselves through contractors.

Recommendations three through six in this section are pole attachment recommendations. While the poles in San Pablo are potential assets, the City has expressed a strong interest in deploying any new infrastructure underground. Based on that preference, this study has been conducted with the assumption that all infrastructure will be buried. Therefore, we will address these pole attachment suggestions in a single sub-section of this report.

3.2.2.1.3.1 Publish Data For providers to make use of infrastructure, they need to know what is available. To the extent allowed by public safety, welfare, and related concerns, local governments should make data regarding conduit, ducts, vertical assets, and other public or proprietary rights-of-way and potentially useful facilities they own or control available to service providers.

3.2.2.1.3.2 Rights-Of-Way Local governments should make available standard forms related to all rights-of-way and easements they own or control. The price for access should be commensurate with the actual additional cost imposed by the provider and incurred by the local government. Pricing and terms should be published and offered on a fair and reasonable and competitively neutral basis. As with permitting generally, any on-going approvals should occur within five business days.

3.2.2.1.3.3 Pole Attachments Many communities in America operate municipal power companies or otherwise have access to poles that can change the equation for a potential new broadband build. The City has expressed a strong desire to bury any new utility infrastructure, rather than adding visual blight by adding new aerial

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October 14, 2015 SAN PABLO BROADBAND PLANNING infrastructure. We concur with this position and our planning assumptions are based on placing buried infrastructure.

3.2.2.1.4 Proactively Improving Existing Infrastructure Some of the more significant cost reductions can come from communities instituting forward looking programs to improve existing infrastructure. While some of these actions require investment, it will provide a more conducive environment for providers in the long run and has the added benefit of reducing the government’s construction and maintenance costs.

In the “Proactively Improving Existing Infrastructure” category, the Fiber to the Home Council has three recommendations:

1. Provide space on all poles for new attachers, 2. Install ubiquitous telecommunications conduit, and 3. Use building codes and community development plans to drive fiber deployments.

3.2.2.1.4.1 Provide Space on Poles This suggesting is irrelevant to the City of San Pablo.

3.2.2.1.4.2 Ubiquitous Telecommunications Conduit By installing conduit for telecommunications with enough space for additional networks, local governments can limit the need for providers to engage new construction, further expediting broadband expansion projects.

Some communities implement a “dig-once” policy that cost-effectively enables gradual deployment of infrastructure. In this model, a community implements a policy mandating installation of telecommunications conduit (or even fiber) any time a trench or road is open in public rights-of-way or when other new construction occurs. The incremental cost of adding the telecommunications conduit is minimal and the “dig-once” policies can lead to a significant pool of infrastructure for use by the municipality or offered to incumbent or competitive providers to incent them to expand services.

This strategy enables deployment of infrastructure for backhaul, middle-mile, and last-mile fiber by private sector providers or that can be leased to the private sector network owners to stimulate service offerings or eventually used for a publicly-owned network. It can also enable placement of conduit directly to wireless facilities sites facilitating deployment of next-generation wireless services and reducing the cost for new competitors to enter the market.

A smart “dig-once” policy can provide significant benefit to a community. However, a haphazard program will result in little benefit. Some important considerations include:33

33 Andrew Cohill of Design Nine suggested most of these factors in Cohill, Andrew Michael (1 February 2012). “Community-Owned Conduit.” Posted as a reply to Christopher Mitchell’s article, “Smart Conduit Considerations for Forward-Looking Communities” at http://www.muninetworks.org/content/smart-conduit-considerations- forward-looking-communities.

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 The “dig-once” policy must be accompanied with rules for the use of the infrastructure.  Ideally, the municipality will determine a telecommunications design and develop a conduit overlay for the community and then add conduit based on the design.  The design should include construction standards and other technical specifications so that conduit laid over time is equally useful.  The policy must be in place across all municipal departments to ensure all open trench opportunities are taken advantage of.  If the infrastructure is not documented, locatable, and accessible it will be very difficult for anyone to take advantage of it.

We have provided a sample model dig-once policy developed for Colorado communities in “Sample Dig- Once Ordinance”.

3.2.2.1.4.3 Use Building Codes and Community Development Plans It is common for local governments to set basic standards regarding minimum levels of service for homes, residential planned communities, and residential and commercial buildings. Local governments should require that new construction and substantial renovations for buildings and new community plans include appropriate last mile broadband infrastructure and structured wiring that allows broadband to be run easily to each room within a home or multiple dwelling unit.

3.2.2.2 Changing the Equation Evaluation  Open and Wholesale Broadband friendly policies seldom have an impact on making networks open and wholesale.  Carrier-Class Broadband friendly policies have little impact on carrier-class qualities of broadband networks. The effect broadband friendly policies usually have is to undermine carrier-class qualities in favor of lower cost and more rapid development.  High Scalable Bandwidth Broadband friendly policies can improve bandwidth availability.  Open and Independent Architecture Broadband friendly policies are usually based on open and independent standards rather than being focused on proprietary solutions.  Alignment with Policy Objectives Broadband friendly policies and public policy objectives can, paradoxically, both contribute to and undermine public policy objectives. For example, the Fiber to the Home Council recommendation to forgo universal build requirements may drive more abundant bandwidth to come to neighborhoods, but it will also likely exacerbate the digital divide.

Incumbent network owner courtship involves some stark limitations. Most incumbent providers are significantly larger than any given served municipality. Very few municipalities would ever ask an incumbent to engage in money losing behavior. Nonetheless, private sector broadband development behaviors that support public policy objectives (like ubiquitous service, extending the reach of advanced

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October 14, 2015 SAN PABLO BROADBAND PLANNING telecommunications services, creating competitive access to infrastructure, ensuring access for low income households) seldom align directly with the profit maximizing primary focus of most private network owners. If the municipality’s demands function to narrow profit margins too much, providers can simply refuse. There is also some risk that incumbents will agree to the municipality’s requests and then fail to fulfill their obligations or meet them in ways that do not align with the municipality’s intent.

Courting the incumbents with broadband friendly policies may result in service improvements, infrastructure investment, and other advances in telecommunications services, but will also usually reinforce the incumbent’s monopoly position in the community.

Pursuing broadband friendly policies will have little impact on private sector providers’ behavior in the City. However, many of the policies that the Fiber to the Home Council recommends to entice private sector providers are valuable to a potential municipal entry into broadband development.

3.2.3 Power Utility Some communities have elected to deploy fiber to the premises and to function as a sole provider on that new infrastructure. One of the leading publicly-owned and operated fiber to the premises projects is the Bristol Virginia Utilities (BVU) OptiNet. BVU OptiNet is a nonprofit division of BVU, launched in 2001, that provides telecommunication services to approximately 9,500 customers in areas around Southwest Virginia. OptiNet is known for its pioneering work in the area of municipal broadband. BVU is acknowledged as the first municipal utility in the United States to deploy an all-fiber network offering the triple play of video, voice, and data services. Offering digital cable, telephone service and high- speed Internet from a remote-area utility provider makes BVU exceptional, even on a global level. Chattanooga, Tennessee and Lafayette, Louisiana have followed BVU’s lead and now offer fairly successful utility department owned and operated fiber to the premises networks.

Not all municipal projects are self-sustaining. Burlington Telecom is a municipal telecommunications department providing residents of Burlington, Vermont with triple play services over a city-wide fiber network. Conceived in the 1980’s, there were a number of attempts to start the project through the 1990’s but a funding source could not be found. Finally, in the early 2000’s, the project got started and the first stage was completed in 2003. The first stage was successful and local government officials believed the project would result in a major future public funding source. Unfortunately, in September of 2009, the City informed the Vermont Public Service Board that it had used $17 million in city money to support Burlington Telecom operations over the previous year. Since then, the Burlington project has been mired in controversy.

In addition to the other difficulties they face, municipally owned and operated networks, while potentially extending true broadband to their residents, do little to offer true choice – they simply function as another single provider overbuild network in a crowded public utility easement.

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3.2.3.1 Power Utility Evaluation  Open and Wholesale The power utility model fails this test.  Carrier-Class Power utility model networks can be built to be carrier-class.  High Scalable Bandwidth Power utility networks can be built to provide high scalable bandwidth.  Open and Independent Architecture Power utility networks can be built on open and independent architectures.  Alignment with Policy Objectives Inherent in the City’s public policy objectives is an unstated need for entrepreneurialism to maximize the value of the proposed broadband infrastructure. By prohibiting competing service providers from offering services on the public infrastructure, the power utility model undermines the innovation that comes from entrepreneurialism.

The power utility model does not effectively meet San Pablo’s public policy objectives.

3.2.4 Public-Private Partnership The alternative that appears to rise up as the best suited to meet San Pablo’s policy objectives, demands of the people, the four principles identified above (open and wholesale, carrier-class, high scalable bandwidth and open and independent architecture), and the needs of private enterprise is a public- private partnership.

Public-Private Partnerships come in a variety of forms and no two are exactly alike. The following definitions were extracted from “Public-Private Partnerships: Terms Related to Building and Facility Partnerships”,34 Government Accounting Office, April 1999. The National Council for Public-Private Partnerships35 was a resource used in developing the GAO report.

 O&M: Operations and Maintenance A public partner (federal, state, or local government agency or authority) contracts with a private partner to provide and/or maintain a specific service. Under the private operation and maintenance option, the public partner retains ownership and overall management of the public facility or system.  OMM: Operations, Maintenance, and Management A public partner (federal, state, or local government agency or authority) contracts with a private partner to operate, maintain, and manage a facility or system providing a service. Under this contract option, the public partner retains ownership of the public facility or system, but the private party may invest its own capital in the facility or system. Any private investment is carefully calculated in relation to its contributions to operational efficiencies and savings over

34 http://www.gao.gov/special.pubs/Gg99071.pdf 35 http://www.ncppp.org/

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the term of the contract. Generally, the longer the contract term, the greater the opportunity for increased private investment because there is more time available in which to recoup any investment and earn a reasonable return. Many local governments use this contractual partnership to provide wastewater treatment services.  DB: Design-Build A DB is when the private partner provides both design and construction of a project to the public agency. This type of partnership can reduce time, save money, provide stronger guarantees, and allocate additional project risk to the private sector. It also reduces conflict by having a single entity responsible to the public owner for the design and construction. The public sector partner owns the assets and has the responsibility for the operation and maintenance.  DBM: Design-Build-Maintain A DBM is similar to a DB except the maintenance of the facility, for some period of time, becomes the responsibility of the private sector partner. The benefits are similar to the DB with maintenance risk being allocated to the private sector partner and the guarantee expanded to include maintenance. The public sector partner owns and operates the assets.  DBO: Design-Build-Operate A single contract is awarded for the design, construction, and operation of a capital improvement. Title to the facility remains with the public sector unless the project is a design/build/operate/transfer or design/build/own/operate project. The DBO method of contracting is contrary to the separated and sequential approach ordinarily used in the United States by both the public and private sectors. This method involves one contract for design with an architect or engineer, followed by a different contract with a builder for project construction, followed by the owner’s taking over the project and operating it. A simple design-build approach creates a single point of responsibility for design and construction and can speed project completion by facilitating the overlap of the design and construction phases of the project. On a public project, the operations phase is normally handled by the public sector under a separate operations and maintenance agreement. Combining all three passes into a DBO approach maintains the continuity of private sector involvement and can facilitate private-sector financing of public projects supported by user fees generated during the operations phase.  DBOM: Design-Build-Operate-Maintain The design-build-operate-maintain (DBOM) model is an integrated partnership that combines the design and construction responsibilities of design-build procurements with operations and maintenance. These project components are procured from the private section in a single contract with financing secured by the public sector. The public agency maintains ownership and retains a significant level of oversight of the operations through terms defined in the contract.

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 DBFOM: Design-Build-Finance-Operate-Maintain With the Design-Build-Finance-Operate-Maintain (DBFOM) approach, the responsibilities for designing, building, financing, operating and maintaining are bundled together and transferred to private sector partners. There is a great deal of variety in DBFOM arrangements in the United States, and especially the degree to which financial responsibilities are actually transferred to the private sector. One commonality that cuts across all DBFOM projects is that they are either partly or wholly financed by debt leveraging revenue streams dedicated to the project. Direct user fees (tolls) are the most common revenue source. However, others ranging from lease payments to shadow tolls and vehicle registration fees. Future revenues are leveraged to issue bonds or other debt that provide funds for capital and project development costs. They are also often supplemented by public sector grants in the form of money or contributions in kind, such as right-of-way. In certain cases, private partners may be required to make equity investments as well. Value for money can be attained through life-cycle costing.  DBFOMT: Design-Build-Finance-Operate-Maintain-Transfer The Design-Build-Finance-Operate-Maintain-Transfer (DBFOMT) partnership model is the same as a DBFOM except that the private sector owns the asset until the end of the contract when the ownership is transferred to the public sector. While common abroad, DBFOMT is not often used in the United States today.  BOT: Build-Operate-Transfer The private partner builds a facility to the specifications agreed to by the public agency, operates the facility for a specified time period under a contract or franchise agreement with the agency, and then transfers the facility to the agency at the end of the specified period of time. In most cases, the private partner will also provide some, or all, of the financing for the facility, so the length of the contract or franchise must be sufficient to enable the private partner to realize a reasonable return on its investment through user charges. At the end of the franchise period, the public partner can assume operating responsibility for the facility, contract the operations to the original franchise holder, or award a new contract or franchise to a new private partner. The BTO model is similar to the BOT model except that the transfer to the public owner takes place at the time that construction is completed, rather than at the end of the franchise period.  BOO: Build-Own-Operate The contractor constructs and operates a facility without transferring ownership to the public sector. Legal title to the facility remains in the private sector, and there is no obligation for the public sector to purchase the facility or take title. A BOO transaction may qualify for tax-exempt status as a service contract if all Internal Revenue Code requirements are satisfied.  BBO: Buy-Build-Operate A BBO is a form of asset sale that includes a rehabilitation or expansion of an existing facility. The government sells the asset to the private sector entity, which then makes the improvements necessary to operate the facility in a profitable manner.

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 Developer Finance The private party finances the construction or expansion of a public facility in exchange for the right to build residential housing, commercial stores, and/or industrial facilities at the site. The private developer contributes capital and may operate the facility under the oversight of the government. The developer gains the right to use the facility and may receive future income from user fees. While developers may, in rare cases, build a facility, more typically they are charged a fee or required to purchase capacity in an existing facility. This payment is used to expand or upgrade the facility. Developer financing arrangements are often called capacity credits, impact fees, or extractions. Developer financing may be voluntary or involuntary depending on the specific local circumstances.  EUL: Enhanced Use Leasing or Underutilized Asset An EUL is an asset management program in the Department of Veterans Affairs (VA) that can include a variety of different leasing arrangements (e.g., lease/develop/operate, build/develop/operate). EULs enable the VA to long-term lease VA-controlled property to the private sector or other public entities for non-VA uses in return for receiving fair consideration (monetary or in-kind) that enhances VA’s mission or programs.  LDO or BDO: Lease-Develop-Operate or Build-Develop-Operate Under these partnerships arrangements, the private party leases or buys an existing facility from a public agency; invests its own capital to renovate, modernize, and/or expand the facility; and then operates it under a contract with the public agency. A number of different types of municipal transit facilities have been leased and developed under LDO and BDO arrangements.  Lease/Purchase A lease/purchase is an installment-purchase contract. Under this model, the private sector finances and builds a new facility, which it then leases to a public agency. The public agency makes scheduled lease payments to the private party. The public agency accrues equity in the facility with each payment. At the end of the lease term, the public agency owns the facility or purchases it at the cost of any remaining unpaid balance in the lease. Under this arrangement, the facility may be operated by either the public agency or the private developer during the term of the lease. Lease/purchase arrangements have been used by the General Services Administration for building federal office buildings and by a number of states to build prisons and other correctional facilities.  Sale/Leaseback This is a financial arrangement in which the owner of a facility sells it to another entity, and subsequently leases it back from the new owner. Both public and private entities may enter into sale/leaseback arrangements for a variety of reasons. An innovative application of the sale/leaseback technique is the sale of a public facility to a public or private holding company for the purposes of limiting governmental liability under certain statues. Under this arrangement, the government that sold the facility leases it back and continues to operate it.

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 Tax-Exempt Lease A public partner finances capital assets or facilities by borrowing funds from a private investor or financial institution. The private partner generally acquires title to the asset, but then transfers it to the public partner either at the beginning or end of the lease term. The portion of the lease payment used to pay interest on the capital investment is tax exempt under state and federal laws. Tax-exempt leases have been used to finance a wide variety of capital assets, ranging from computers to telecommunication systems and municipal vehicle fleets.  Turnkey A public agency contracts with a private investor/vendor to design and build a complete facility in accordance with specified performance standards and criteria agreed to between the agency and the vendor. The private developer commits to build the facility for a fixed price and absorbs the construction risk of meeting that price commitment. Generally, in a turnkey transaction, the private partners use fast-track construction techniques (such as design-build) and are not bound by traditional public sector procurement regulations. This combination often enables the private partner to complete the facility in significantly less time and for less cost than could be accomplished under traditional construction techniques. In a turnkey transaction, financing and ownership of the facility can rest with either the public or private partner. For example, the public agency might provide the financing, with the attendant costs and risks. Alternatively, the private party might provide the financing capital, generally in exchange for a long-term contract to operate the facility.

We find that the most likely way for San Pablo to meet its broadband development policy objectives is a public-private partnership in which the City builds fiber to the premises infrastructure and uses a third- party to manage and maintain that natural monopoly element of the broadband environment as a public utility. The third-party asset manager will not provide retail services, but will make the network available to multiple private service providers who will do so. In other words, the best apparent broadband delivery solution is financially responsible ubiquitously deployed public-private partnership open access fiber to the premises.

Let’s take a moment to look at each of these six characteristics: (1) financially responsible, (2) ubiquitously deployed, (3) public-private partnership, (4) open access, (5) abundant bandwidth, and (6) fiber to the premises.

3.2.4.1 Financially Responsible The City of San Pablo must understand that one of the reasons private enterprise network owners have not deployed more advanced services is because the cost is too high for them to be supported by available profit margins. One of the advantages of a municipal project is the availability of long-term low interest financing for capital infrastructure projects.

The availability of favorable financing should not result in a careless fiscal environment. The municipal bonds or other public funds used to back the debt must be paid. Some projects may be able to pay their operating expenses and debt service through direct project revenues. Others will need to measure tax

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October 14, 2015 SAN PABLO BROADBAND PLANNING increment benefits, cost savings, and other indirect revenues in order to show fiscal responsibility. In some cases, public policy objectives may justify network subsidies from general fund spending or through other special service funds (like utility fund transfers or special assessment areas).

As we discuss the public-private partnership model, we will more fully address risk sharing between the public and private partners that will enhance the financial responsibility of the project.

3.2.4.2 Ubiquitously Deployed One of the ways cities differ from incumbent private network owners is in the desire to make services reasonably available to all residents and businesses in an effort to overcome the digital divide and otherwise behave equitably. Incumbent private providers target implementation in areas that require the least capital investment and generate the highest returns. Often, certain franchise agreement stipulations or other regulation impose ubiquitous builds on the incumbents but typically only at minimum service levels. Residential areas with target demographics and certain commercial areas will usually get better service than other retail, industrial, and residential areas.

While regulatory efforts help bridge the digital divide in that they may require ubiquitous service deployment, they typically have little effect diminishing disparity in types of available service. Furthermore, because incumbents tend to manage their network bandwidth as a scarce resource, many services are priced out of reasonable reach of lower income households and small businesses.

3.2.4.3 Public-Private Partnership Public networks can be sponsored by municipalities, economic development corporations, counties, states, coalitions, inter-governmental agencies, or any imagined group that can be trusted with the maintenance of the public good. The role of the public owner is not to compete directly with private enterprise solutions. Rather, government institutions identify and provide “natural monopoly” services, common or public good services, and market failure services. 21st century broadband infrastructure shows characteristics of all three of these areas typically calling for government intervention. A public network allows the government to provide the natural monopoly aspect of broadband (the infrastructure itself) while opening the non-monopoly competitive aspect of providing services to multiple providers.

The public private partnership we propose for the City of San Pablo is a lease-style public-private partnership where the City (or an agent of the City like the economic development corporation) secures capital to build the network and leases it to a third-party network operator or asset manager. The asset manager will collect wholesale fees from service providers taking advantage of the network to provide retail services. The City may pay the asset manager to operate the network, but will receive lease fees from the asset manager. The financial model described in the “Operations Plan” section below suggests that, with conservative assumptions, the lease fees paid by the asset manager to the City will be sufficient to cover the operations and maintenance and the project’s debt service after third year.

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1 Lender City 6

5 2

PPP 4 SP

1) Lender provides capital to City 3 2) City builds the network – using expertise of PPP 3) Subscribers pay service providers for retail services 4) Service providers pay PPP for wholesale services 5) PPP pays City a lease fee for the network Subs 6) City services debt

3.2.4.4 Open Access Public networks can best meet their policy objectives by adhering to principles of open access.

Open access can be described by two principles.

The first is more commonly referred to as “net neutrality”. Net neutrality suggests that the network owner provides similar service to any legal use of the network – that is, the network owner does not prevent legal traffic from traversing the network; nor does the network owner favor one organizations traffic over another based upon fees or other non-technical criteria.

The second principle of open access is that described by the airport analogy described above. Rather than creating a vertical monopoly where the city controls the infrastructure and the delivery of services, an open access network makes infrastructure available to as many competing service providers and services as the market will bear.

3.2.4.5 Fiber to the Premises Having resolved to provide a long-term gigabit enabled competitive platform for multiple simultaneous service providers, public entities contemplating a broadband solution are left with few options other than active Ethernet fiber to the premises (FTTP).

The anecdotal evidence for building fiber to the premises networks is strong. You may hear copper and wireless vendors saying something to the effect of, “It’s just as good as fiber;” you will never hear a fiber network owner justifying themselves by saying that their network is just as good as wireless or DSL or DOCSIS.

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Consider the following analogy to illustrate the long term scalability of fiber: if a standard drinking straw represent dial up speeds (56K), then a pipe about a foot in diameter equals a 100 Mbps connection. Using the same scale, a Gigabit connection would roughly be a pipe 3 feet in diameter. The fastest commercial connections for a single fiber would equal a pipe about 115 feet in diameter and the theoretical capacity of a fiber would be represented by a structure over 1,600 feet in diameter – or as large as the Hoover Dam. Clearly, if we are using drinking straw capacity today, we have room to scale a network given the theoretical capacity of fiber.

Typical connections on fiber networks operate at 100 Mbps or 1 Gbps. The pipes shown illustrate those The straw on the left represents the capacity of capacities relative to DSL connections. a dial-up connection; the one on the right, DSL.

Current technology can deliver terabits (1 million megabits) over a single strand of fiber. The theoretical capacity of a single fiber equates to a pipe that would be the size of the Hoover Dam!

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This is not to suggest there is no place for wireless. Wireless networks extend and augment a fiber network providing access where fiber is yet to be built and mobility that simply cannot be replicated on a wireline type of network like fiber to the premises.

As we consider fiber network design, we would first like to first look at active Ethernet vs. PON. We will then review some outside plant design considerations and logical network considerations.

3.2.4.5.1 Design Considerations: Active vs. Passive A fundamental tenet of any conductor is that, as long as the media is dedicated to a specific end-user, then the full capability inherent in that media can be accessed by that end user. This leads to the understanding that a fiber "from" the home should be carried into the network as far as financially reasonable before that fiber is then terminated at some transition or aggregation point, whether it is a passive optical combiner/splitter (in a PON environment) or an active electrical/optical switching device.

Many PON networks have been engineered with PON splitters deployed as close to the home as possible with the intent of minimizing fiber costs. While this logic does indeed save a few dollars per home passed during the initial deployment, it is short-sighted and may lead to scalability and operational issues for the network in that it limits the deployment of electronics for future generations. And while the per-home passed cost is marginally reduced, a passive deployment actually increases the overall per subscriber electronics costs: unless every home on that edge split subscribes to services, the cost allocation of the OLT gear is over a smaller number of subscribers. In a typical, municipal competitive overbuild, take rates are less than the 100% assumption upon which the capacity of the PON is designed and the cost savings calculated.

A summary comparison of active vs. passive optical networks is in order here. In 2008, KEYMILE (www.keymile.com) published a white paper titled “Ethernet Point-to-Point vs. PON – A Comparison of Two Optical Access Network Technologies and the Different Impact on Operations.”36 After describing the two technologies, KEYMILE presents the following technical comparison summary table (some spelling and terminology have been Americanized from the European spellings in the KEYMILE version):

36 Keymile (26 Aug 2008). AON vs. PON – A Comparison of Two Optical Access Network Technologies and the Different Impact on Operations. Viewed 2 May 2014 at http://www.slideshare.net/m1chaelangelo/aon-vs-pon.

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Active Assessment PON Assessment Comparison Bandwidth Good Average Advantage Active Allocation The bandwidth allocated to the The GPON interface on the OLT Because of its higher flexibility, subscriber is governed by the today is 2.5/1.25 Gbps active has a clear advantage. interface type, or by traffic (downlink/uplink). The There are limitations in a PON shaping on the access node bandwidth per subscriber is network because only the and is therefore adjustable in determined by the splitting segment bandwidth (2.5 Gbps) kilobit increments. factor (usually 1:32 or 1:64). can be allocated to the Modern PON systems allow subscribers. bundling of several time divisions in dynamic bandwidth allocation; however, the bandwidth in a PON segment is limited to 2.5 Gbps. Maximum Good Satisfactory Advantage Active Bandwidth per As all subscribers can be With regards to today's GPON In terms of bandwidth per Subscriber connected with their own fiber standards, the maximum subscriber, active enjoys a clear optics, bandwidth of between conceivable capacity of a fiber advantage. The maximum 100 Mbps and 1 Gbps (or optic equals the total capacity bandwidth per subscriber is a more) per household or of an OLT port, i.e., 2.5 Gbps lot higher. The ability to company can be achieved. (active connection without allocate individual subscribers Active fiber optic topology splitter). Realistically, the different bandwidths (e.g., in means that it is easy to use bandwidth with splitter and a the case of business systems with even higher division of usually 1:32 is 78 customers) is also more flexible bandwidths for special Mbps or 39 Mbps at 1:64 (all than when PON systems are applications. figures apply to downstream used. traffic). Bandwidth Simple Difficult Advantage Active Increase As the active access nodes Depending on the system's In this case, active architecture have modular structures, the technology, several time is superior to the PON's point subscriber interfaces can be divisions could be bundled and to multi-point architecture. upgraded to higher therefore increased by a factor Just by adding boards, bandwidths. It is often of n + 1 at the cost of the subscribers can obtain an sufficient to just switch the maximum number of upgrade, without the network fiber optic cable to be able to subscribers per PON branch. architecture or the service of operate it again. The bandwidth of the PON port other subscribers having to be on the OLT is the upper limit, changed. i.e., 2.5/1.25 Gbps (down/up). Effect of Low High Advantage Active Malfunctions Each customer has dedicated A PON tree is a shared medium, Similarly to WLAN, data in the and fiber optics. In general, wire i.e., the single fiber optic PON network can be encrypted tapping is not possible. termination point. Data is individually. Nevertheless, it is Manipulation separated by allocating the possible to tap into another time division and encryption subscriber on the same PON software. The setup is in the tree and hack the encryption. customer's network termination. Reliability of Good Poor Advantage Active the Subscriber In an active network, a To date, there are no plans to In terms of availability, PON is Path customer can be connected in connect customers redundantly at a clear disadvantage a ring or by dual homing. In within a PON. compared with active. other words, a customer can be connected redundantly.

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Active Assessment PON Assessment Comparison Level of Very Good Poor Advantage Active Sustainability Advantages such as flexibility, The customers in a PON tree Requirements from business for Connecting security, and performance are all treated the customers are always special, come very much to the fore. A same. Customized PON network concepts tend to Large-Scale / router or switch can be used as requirements are only possible be more static. As a result, Business an optical network termination above protocol level 3. active architectures are a much Customers to separate services. better choice in this case. Flexibility of Good Poor Advantage Active Usage Active Ethernet uses Right up until today, there is no In this case, the operator of the Regarding standardized Ethernet real interoperability between active network can act more interfaces, a wide range of competing PON [vendor’s flexibly and exploit real cost Optical equipment can be used to equipment]. The operator is benefits in the long term too Network terminate networks. forced to purchase the ONTs (sustainability). Termination and ONUs from the OLT supplier (creating dependency). Table 12: Active vs. PON Technical Assessment

KEYMILE also provided a CAPEX financial comparison summary:

Active Assessment PON Assessment Comparison Costs of the Average Average Advantage Active Subscribers' Because standard Ethernet ONTs are already produced in By using standard interfaces, Terminal technology can be used. Today vast numbers but there is no active CPEs will probably have simple CPEs (e.g., Ethernet compatibility between an edge on costs in future Equipment media converters) can be different manufacturers. because of strong competition. (CPE) found for under $50 each.

Costs of the Average Low Advantage Passive Network Because each subscriber will Because each port on the OLT Because optical paths can be Technology occupy a dedicated laser port will be shared by several used by several subscribers, on the network node. customers as splitters are used. PON is a bonus in regard to the (Active price per subscriber. Components, Fully Expanded Network) Initial Average High Advantage Active Investment in Only paying customers will be Each optical splitter is Only active customers have to the Network allocated an active port. connected to an active OLT be connected. port. Technology (Active Components, HC/HP 10-40%) Space Required Average Low Advantage Passive for Systems Numerous active interfaces Little space required at the At the central site, the PON Technology have to be accommodated at central site but the passive requires less space. the central site. However, the splitters have to be placed in space required decreases with the access network. each new generation of active systems. Table 13: Active vs. PON CAPEX Assessment

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Finally, KEYMILE provided an OPPEX financial comparison summary:

Active Assessment PON Assessment Comparison Energy Average Low Advantage Passive Consumption Because of the high number of Because of passive splitting, Because of the passive splitter laser interfaces energy costs energy costs are low. and greater subscriber density are high. However, new on the OLT, PON is better in systems achieve much better this case. values than the last generation. Level of Low High Advantage Active Difficulty in Because of the active topology Because, in the worst case Identifying and rectifying faults Identifying and and the dedicated optical scenario, a faulty ONT cannot is much easier in active transmission path, many faults be localized by the NMS. A topology than in a PON. Rectifying can be traced from the NMS. local visit to the customer is Nevertheless, analysis Faults often required. Depending on capabilities in a PON can be how easy the ONT is to access, improved by using optional finding the fault can take some monitoring systems. time. Follow-Up Costs Low High Advantage Active for Upgrades Because the active components An entire PON tree is always Because of enhanced have enhanced scalability and affected by an upgrade. All customizable flexibility, active customers can be separated, ONTs have to be exchanged at Ethernet has an advantage in customized upgrades can be the same time. As a result, terms of upgrade capabilities. carried out in the active individual upgrades are network and the CPE can be virtually precluded. changed. Table 14: Active vs. PON OPPEX Assessment

3.2.4.5.1.1 Reliability In addition to interoperability, another criterion used to select technologies is the guiding principle of building nothing less than a carrier class network. Since reliability is at the heart of a carrier class network, municipalities should filter out those technologies incapable of providing a carrier class level of reliability – at least four 9's of up time.

There are aspects to reliability over which the network owner has no control, and then there are those over which it clearly does. For example: while the occurrence of "backhoe fade" (the cutting of a line by a backhoe) is out of control of the physical network provider, the effect of backhoe fade on the delivered services is dependent on the topology of the solution. “Figure 24: Active vs. PON Exposure to Fiber Cut Failures” shows that effect in different network topologies (the unprotected portion of a signal's path is indicated as a dotted line and the protected path as a solid line).

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Figure 24: Active vs. PON Exposure to Fiber Cut Failures

The potential reliability of the network should be weighed against ease of maintenance. While a passive topology may require fewer maintenance trips, there are few mechanisms available to identify where a fiber cut occurs and no mechanism to maintain connectivity when there is a cable cut in the distribution network. Inasmuch as fiber cuts are an inevitable fact of life, the analysis of system reliability depends heavily on an assessment of the impact of cuts.

Assessing the potential impact of downtime in a PON solution first requires an analysis of the failure group size per cable and the probability for the cable cut. By estimating both the frequency of cable cuts and the average number of subscribers affected per unprotected optical path, we can determine the impact of an inevitable cut. The larger number of unprotected subscribers carried on a PON solution near a hub makes the PON insufficiently reliable to be called carrier class. Applying the same rates for cable cut occurrences across all layers of the network; one can derive PONs have up to 10 times more unprotected optical path than a comparable active network.

Therefore, it is expected that the cut rate/failure rate of a PON would be as much as 10 times higher than its active counterpart, thus further reducing its reliability even below the three 9's shown in “Figure 25: Maximum Limit to Availability Due to Fiber Cuts”.

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Figure 25: Maximum Limit to Availability Due to Fiber Cuts

3.2.4.5.1.2 Plentiful Bandwidth Though fiber itself is capable of supporting incredible speeds, not all fiber solutions deliver equally on that promise - depending on the network architecture, the resulting available bandwidth can vary greatly. Some solutions start out with high bit rate optical speeds, but after those speeds have been shared across multiple end-users, the bandwidth that is ultimately available to the end-user is often no better than what is available to them today over incumbent copper based or wireless systems. To benefit from the potential of fiber, municipalities should identify which solution has the most bandwidth and the most flexibility in applying that bandwidth.

A simple analysis of some typical solutions for a 1,000 home neighborhood reveals some startling differences.

Active/Dedicated Passive/Shared 100 1 Gbps OC3 APON OC12 APON 1 Gbps GPON Mbps 1,000 Home 100Gbps 1,000 Gbps 5 Gbps 19 Gbps 31 Gbps Footprint Per User 100 Mbps 1,000 Mbps 5 Mbps 19Mbps 31 Mbps

Table 15: Active vs. PON Bandwidth Availability

This comparison obviates that an active solution is as much of an improvement over passive solutions as passive solutions are over existing DSL.

Even with the most rudimentary understanding of what a fiber network can offer, consumers understand that incremental improvements of bandwidth over what current solutions offer are not compelling - they expect a quantum leap in the speeds offered over a fiber network compared to incumbent solutions. We need look no further than the ill-fated deployments of ISDN in the 1990’s to

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SAN PABLO BROADBAND PLANNING October 14, 2015 see that consumers expect a clear differentiation in the offerings. Inasmuch as ISDN speeds were not substantially different from dialup, and given the greater speed offered by DSL, the incumbent phone companies abandoned ISDN deployments and moved on to DSL.

Furthermore, the network owner should expect the network to have capacity sufficient for significant growth. Having invested so much in its system, communities should want to avoid additional, potentially expensive major changes to the network architecture or to the corresponding technologies to accommodate inevitable growth. The active solution clearly offers the superior solution demanded of the high scalable bandwidth principle.

3.2.4.5.1.3 Cost to Scale The next pertinent bandwidth concern to be considered is the cost to scale the selected solution. Since 90% of the money spent on transport technology is spent in the access infrastructure, and since it is so difficult to change out the edge of the network, it makes sense to place a great deal of emphasis on bandwidth throughput at the access layer.

It is generally acknowledged that APON solutions do not scale well; therefore, they do not satisfy the scalability requirement. Given their limitations, it is likely that the only evolutionary path for them is a complete replacement when increasing bandwidth needs exceed their capacities. GPONs, on the other hand, are more likely to evolve in the fashion that PONs were designed to be scaled. Over the next five years, the FSAN 984.x Gbps could see changes in the reinforcement of the uplinks and in the reduction of the splitter ratio. Still, a deployment of even a 2.5Gbps GPON solution split 32:1, delivering 80 Mbps of dedicated capacity per user falls short of the bandwidth of even a 100 Mbps active solution.

However, having tremendous amounts of bandwidth in the access layer is of little use if that bandwidth cannot be passed on through cascading aggregation layers to the core network and its connection to the rest of the world. Small networks may have only a single switch bringing together the community and connecting it to the rest of the world, a larger network, a network with sufficient scale to make a municipal open access fiber to the premises project succeed, requires a relatively large core network to aggregate traffic at the edge and send it on.

In the initial deployment of the network, the access layers will not have reached capacity. The cost conscious tendency is to implement solutions that handle current traffic needs, ready to scale as need demands. As the use of the network increases, and as applications require greater amounts of bandwidth, the need for cost effective scalability becomes obvious. Therefore, an important consideration is the ability for the network to scale beyond its initial deployment to accommodate the robust core bandwidth requirements of a more mature network.

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To evaluate the different scaling costs of GPONs and active solutions we will start with an initial bandwidth of 1 Gbps within the distribution network for every 100 subscribers. Each solution’s cost will be tracked as the amount of bandwidth in the distribution network is doubled again and again. A comparison of cost and an evaluation of the convenience of the scalability between the two potential solutions present a compelling reason for choosing an active solution over a passive one. “Figure 26: Active vs. PON Cost to Scale” shows how costs increase as the capacity of the network scales.

Besides being less costly to scale, Figure 26: Active vs. PON Cost to Scale the active solution has the benefit of being very convenient, requiring nothing more than the addition of single mode GBICs. The GPON solution, however, can be problematic if, at the hub, the real estate is not sized to handle four times as much equipment (mooting the space advantage given by KEYMILE to the passive solution in “Table 13: Active vs. PON CAPEX Assessment”). Finally, because the GPON solution is still a developing standard in the industry and is not yet a global standard, it is not inconceivable that the standard could evolve, thus making future equipment incompatible with the equipment deployed today requiring a large-scale trade out of end- user equipment.

3.2.4.5.1.4 Open Service Provider Support Having determined that an active solution best addresses the principles of high scalable bandwidth; carrier class functionality; and open and independent architecture, technology evaluators can address the last of the four principles guiding their selection of a municipal fiber to the premises solution: support for an open access network.

It is worth re-emphasizing that this principle may likely be the most important consideration for any municipal deployment. Publicly-owned advanced communications infrastructures only make political sense if they help the private sector to thrive. A properly formed public-private partnership frees the fiber infrastructure from monopolistic business practices and facilitates the growth and development of private, competitive solutions, allowing private industry to flourish. Before selecting a technical solution

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SAN PABLO BROADBAND PLANNING October 14, 2015 that supports this fundamental principle, it is important to understand how services should be delivered over the network.

The primary function of the infrastructure is the delivery of data. To many, that means Internet traffic only. Though not always considered such, voice and video services are also, ultimately, data. In fact, anything that can be digitized and delivered over the fiber optic network is, in essence, data. The current vertically integrated model for voice and entertainment video is evolving and converging with other data services. Today, VoIP services are sold independently from the PSTN - and independent from the data provider itself. As we recall the way in which data service providers competed one with another through dial-up modems across the PSTN, we can envision similar competition and end-user flexibility as services delivered over the fiber infrastructure are separated from the infrastructure ownership.

Technically, services can be separated from the infrastructure quite readily. In fact the OSI model can be used to describe the demarcation point for the delivery of services. In the OSI model, layer 1 represents the physical media fiber, layers 2-4 embrace transport and networking, and layers 5-7 deal with applications. Today service providers typically provide network services at the IP layer (layer 3) and depend heavily on TCP/IP for the connections. It is an effective model, but it has the disadvantage of being at a minimum management intensive and perhaps even intrusive to the services delivered.

If the municipally run network is deployed utilizing routing protocols, it is likely that the services delivered through that infrastructure will not be transparent to the infrastructure. While it is certainly possible to design, deploy and operate a network that is based on packet handling through to layer 4, it is likely that services delivered in that way would be more limited than if those packets were transported only at layer 2. Ideally, a layer 2 network presents the greatest variety of options for the service providers and the least amount of management for the owner. Figure 27: OSI Layered Model

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Wholesale network services at layer 2 are very attractive to a municipal owned network from a variety of perspectives. Transparency to the retail service provider is more complete - but a transparency with respect to the popular hacks, viruses, and DOS attacks means the municipal owner can minimize its involvement not only in the retail products sold across the infrastructure, but it avoids the majority of the problems as well.

As anyone would, municipalities place more emphasis on solutions that will be functional for longer periods of time. Because layer 2 is inherently simpler, the likelihood of technological obsolescence is reduced. If the network is deployed emphasizing layer 2, changes that occur at layers 3 and 4 are more likely to be transparent allowing the investment in network technology to be relevant for a longer period of time.

An emphasis on layer 2 does not mean that the network operates exclusively at layer 2. In fact, an Ethernet network supplemented with MPLS introduces higher complexity, through layer interaction, than a strict layer 3 or 4 network would. Despite that complexity, the access network needs some ability to influence traffic handling at some of the higher layers than just layer 2. To protect the network and minimize problems, the network needs to be able to support some layer 3/4 filters along with ACLs.

The reality is that a complete layer 2 network would be characterized as one large broadcast domain. Without some simple filters in place, all broadcasts from all users would reach all of the other users in the network. Simple DHCP requests would end up looking for the nearest server to grant an IP address. In addition to DHCP filtering, NetBIOS filters would be essential, especially when such common functions, such as the sharing of a hard drive between Windows machines, would also have the unexpected side-effect of letting everyone on the network see those drives, whether that was intended or not.

Transparency to services does not mean traffic cannot be directed according to at least a high level set of needs. Traffic that needs to be isolated while traversing the network may be switched in a point to point service similar to the virtual tributaries found in a SONET solution. Point to point connections allow for services such as transparent LAN service to be delivered through the infrastructure. For applications such as voice over IP point to multipoint connectivity gives the isolation between end-users. For general connectivity, a multipoint to multipoint network provides the greatest amount of flexibility for connectivity through that VLAN.

Despite the limitations described, a network emphasizing Layer 2 with some Layer 3 and 4 services presents the best option for longevity, ease of management, and transparency to the service provider.

Even in a Layer 2 environment, the service provider may elect to offer higher level services to accommodate less sophisticated service providers and to enhance consumer choice.

3.2.4.5.1.5 Active vs. Passive Summary Based on the evidence, an active Ethernet solution best meets the demands of the principles identified in the “Principles” section.

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3.2.4.5.2 Design Considerations: Outside Plant Design In competitive overbuild scenarios the need to defer complexity and cost to as close to revenue generation as possible dictate that network construction end at the property line of potential subscribers. In other words, drops are deferred and fiber will be placed up to, but not beyond, the property line for each residence and business. In this scenario, sufficient quantities of fiber are deployed in each area based on the anticipated maximum take rates and adequate relief plans are in place to accommodate the happy accident that success exceeds planned results.

To reduce the cost of construction, the access and distribution network is run predominantly up one side of the street only, with a lateral crossing the street at reasonable points. During initial construction phases, these laterals are left as empty conduits, connecting the subscriber splice box to a lateral pull box. During engineering, engineers track the number of network splices per subscriber splice box: if it turns out that the design requires substantially more than one splice per home passed, the design is likely more costly than necessary and it is revised.

In the deferred drop model, when a consumer requests services, a conduit is placed between the lateral pull box and the new subscriber’s premises. The drop fiber is then spliced at the subscriber splice box and pulled (through the lateral pull box if across the street) to the home for connection to the interior electronic termination point known as the customer premises equipment (CPE) or the access portal (AP).

3.2.4.5.2.1 Redundancy Another consideration in architecting the network examines the value/requirements of single vs. dual physically redundant fiber paths to each end point. If there are two paths the fiber can take to get to the end user, then the reliability of the solution increases - but so do the costs. An appeal to the guiding principles leads municipalities deploying open access fiber to the premises to a determination to provide redundancy in all layers of the network down to, but not including, access level infrastructure.

A typical analysis of potential revenue opportunity, construction costs, and the frequency of outside plant cuts, usually suggests that the extra cost associated with providing a redundant path to every end- point exceeds available revenue streams. More specifically, under current market conditions, physically diverse paths to most businesses could be offset by projected business revenue, but redundancy to support residential services could not. Further, business premium rates are likely to diminish over time as deregulation eliminates arbitrage opportunities making long-term dependence on premium business pricing unrealistic.

The distinction between business and residential customers is not determined by zoning: San Pablo has many home based businesses. With the advent of the Internet almost anyone with the desire to develop a website could also develop a work-from-home economic model. In point of fact, open access fiber to the premises encourages more work at home and home based businesses. This means that broadband development plans for what are traditionally viewed as "residential neighborhoods" must allow for the inclusion of redundant fiber runs to home-based businesses - both now AND in the future. Rather than attempting to deploy redundancy to all addresses in the initial design, it is important to be

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October 14, 2015 SAN PABLO BROADBAND PLANNING able to add access and drop level redundancy as customers demand it (and as they are willing to pay for it).

3.2.4.5.2.2 Strand Counts An additional question that needs to be answered is how many fibers should be taken from the different physical locations back into the network. For a typical residence, a single strand of fiber is sufficient. This conclusion is supported by the understanding that a single strand of fiber has over 150 Tbps theoretical carrying capacity, and that photons are unlikely to interfere with each other through nonlinearities in the fiber over the relatively short FTTP distances. Businesses, MDUs, and MTUs may require, in some cases, not only redundant connections, but also multiple fibers to service their needs. To accommodate possible redundant connections and multiple fibers to certain units, open access fiber to the premises networks should be designed with fiber counts to address immediate needs and with relief plans to ensure the ability to meet future demands.

3.2.4.5.2.3 Optimal Fiber Aggregation After evaluating some basic decisions as to how the outside plant should be structured, the cost associated with deployment must be considered. Since construction costs are the single largest capital expenditure component of a municipal open access fiber to the premises implementation, a careful analysis of the impact that design has on construction costs is critical.

The goal for a proper outside plant analysis is to gather and analyze information on all of the pertinent material, components, and labor costs related to both aerial as well as underground deployment. Such an analysis should identify the most cost efficient location to terminate the dedicated fiber strands and to implement fiber sharing technology. In other words, how many homes will be serviced by a single aggregation point, or community cabinet (determining the optimal fiber aggregation point or OFAP)? The OFAP approach has been applied to various network deployments for quite some time, including design work to support digital loop carrier deployments, fiber node placement for HFC, and in the WINfirst FTTP deployment in Sacramento and Dallas where the OFAP technique was used to layout the most efficient fiber aggregation cabinet sizes and locations. The preliminary design for San Pablo has incorporated OFAP principles.

In the analysis, it is important to note that costs for construction vary not only region by region but city by city and even neighborhood by neighborhood. The primary variables affecting construction costs are related to the density of homes/structures per constructed mile and the type of construction required - either buried or aerial plant. Because of constant variation in costs, the optimal engineering design needs to be flexible enough to adjust fiber routing and aggregation strategies during engineering. As service areas are outlined and as the outside plant design gains detail careful consideration and reconsideration of the OFAP must be taken.

3.2.4.5.2.4 Distribution Network Identifying the Community Cabinet location where each of the dedicated access fibers terminates allows the design of the distribution network. Since the fibers themselves will be functional long after the

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SAN PABLO BROADBAND PLANNING October 14, 2015 debates over active and passive have been settled (or at least until they have cycled back and forth a few times), the distribution fiber should be deployed with thought given to the carrier class principle. In other words, even if a PON design is chosen for today, the design should support the possibility of conversion to an active design as future needs dictate.

The most obvious approach should be to deploy physically diverse redundant paths from these access nodes back through to the core nodes. This distribution network, which connects the dedicated access plant from the community cabinets through to the hub locations, should have a fiber count based on the type of access technology chosen today: one fiber for every eight homes passed for a PON and one fiber for every thirty to fifty homes passed for an active solution. However, in the case of a PON, by splitting the fibers (normally deployed single threaded) over two physically diverse paths, the outside plant can support both a PON deployment today and be prepared to implement the higher reliability inherent in the physical diversity of an active deployment in the future.

3.2.4.5.2.5 Access Portals Despite commonalities in these areas among certain available solutions, aspiring open access fiber to the premises network owners should evaluate the interaction of different vendor solutions across each layer. During this evaluation, an interesting debate presents itself: where to place the customer premises equipment that terminates the fiber connection (the access portal or AP). Should it go inside or outside the premises?

Different deployments across the country show that both are reasonable options - it's really a question of balancing trade-offs. Placing the AP indoors leads to questions of ownership and liability, maintenance access to equipment, and so on; placing it outside leads to questions about security from tampering, protection from the elements, and so on. Ultimately, the additional cost of hardening the enclosures for outdoor placement seems a greater concern than an indoor placement with less access.

3.2.4.5.3 Design Considerations: Logical Network Considerations As with all other key decisions, municipalities implementing open access fiber to the premises must select transport layer topology through an appeal to the guiding principles. To discover what options exist, aspiring network owners may solicit proposals from vendors through a public procurement processes or other means.

Recognizing that many solutions could, in some way, address the needs of an open access fiber to the premises implementation, reviews of potential solutions should focus on the guiding principles - particularly the principle of open and independent standards - as the defining criteria for evaluating the options. Not surprisingly, most available technologies support the global Ethernet standard. Another smaller set of potential solutions support industry standards rather than global standards, many focus on the G.983 standard. Finally, another grouping of similar solutions included vendors supporting FSAN's G.984 GPON standard.

As might be expected, vendors offering anything other than the Ethernet or SONET compliant solutions are unable to commit to interoperability - even those compliant with the industry standards. Even

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October 14, 2015 SAN PABLO BROADBAND PLANNING though the FSAN standard has been under development for quite some time, few vendors can propose solutions using that standard that can provide a list of other vendors with whose solutions theirs were compliant. The other common industry standard, SONET, has vendors who are, in fact, interoperable. Of course vendors representing unique solutions or solutions based on the developing GPON standard are unable to commit to any kind of interoperability whatsoever. Clearly, in appealing to the guiding principles and by committing to adopt solutions that supported open and independent network standards, only vendors offering Ethernet solutions, with dozens of interoperable respondents, made sense.

3.2.4.5.3.1 Traffic Management The guarantee that services can be delivered in a carrier class manner is affected by more than cable cuts; it also requires sufficient bandwidth and traffic management capabilities. Network designs should be scrutinized for traffic management support, including the ability to manage traffic flows in a sufficiently granular fashion to preclude one service provider's services from over-riding or interfering with another’s. ATM and SONET have been designed with significant traffic management capabilities. With their deterministic cell and pipe characteristics, these protocols excel at traffic management and isolation. SONET is a bit less flexible; the lowest level of granularity for traffic management is by definition a virtual tributary, but SONET vendors offer a mix of Ethernet and ATM interfaces complete with switching fabrics with their products.

Native Ethernet has had the ability to identify or tag different types of traffic, but it was not expected to scale to city wide proportions and certainly not to provide bandwidth management. However, supplementing Ethernet with the standardized implementation of MPLS and label switch paths allows for the utilization of predominantly switching protocols to provide connectivity in a reliable and managed fashion without intruding on the service provider's quality of service management techniques. Prior to employing MPLS, Ethernet access infrastructures utilized ATM core switches or even SONET to ensure traffic handling characteristics suitable to maintain availability of services. Today, Hierarchical Virtual Private LAN Services support scalability, and Ethernet access infrastructures can be aggregated through MPLS core networks to allow for the entire pertinent network characteristics required: availability, bandwidth, packet loss, latency, and jitter.

From the perspective of traffic management, then, there may be no clear differentiator: ATM, SONET, and Ethernet/MPLS all address the need for reliability as it pertains to building a carrier class network.

3.2.4.5.3.2 Scalable Bi-Directional Bandwidth Inasmuch as there is no practical difference in the reliability of managing bandwidth among ATM, SONET, Ethernet/MPLS solutions, the availability of high, scalable bandwidth itself remains as an area of prime differentiation.

Included in the principle of high scalable bandwidth is the requirement for symmetrical transmissions. Examples of networks that follow an alternative logic are the hybrid fiber coax networks deployed by the cable companies. The HFC networks which were initially engineered with the assumption that the

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SAN PABLO BROADBAND PLANNING October 14, 2015 download usage would be roughly 17-19 times that of the upload, do not provide symmetrical transmissions. This assumption may have been the result of the cable industry's focus on their previous pure broadcast model, or it could have come about due to the belief that most people would be satisfied with browsing and downloading from the internet while only a select few would actually generate content to push. Shortly after these networks were deployed, capacity planners began to see download to upload ratios much closer to 3 to 1 rather than 17 to 1.

Today, the internet has become a network for interactive communications. A predominant value of the internet is its ability to bring people with similar ideas together and to create virtual communities around real communities or common interests. These groups interact through their web pages, blogs, instant messaging, voice services, video conferencing, email and other bi-directionally intensive methodologies. Their interaction, however, is limited to what their bandwidth supports, and this is proving to be a growing source of frustration for many. In recognition of the growing need to push information out to the internet in an interactive fashion, any practical solution to the demands of building a network with high, scalable bandwidth should include symmetrical high-speed transmission.

3.2.4.5.3.3 Network Interfaces A Layer 2 Ethernet infrastructure is very well suited for native data applications. Since most applications are already designed to accommodate Ethernet's dominant global standard for data interfaces, the network needs offer just a couple of options to support the bulk of these applications:

 The Access Portal (or AP) represents the media conversion point, and traffic mapping interface, for data applications.  Optical Interfaces may be required for more sophisticated businesses, both via multimode as well as single mode fiber. Those interfaces can be handled directly off of the access distribution switches.

Other standard applications, such as telephony and voice, should not require end-users to change their personal devices. To overcome the need for specialized equipment a terminal adapter, set-top box, or other intermediate device could be deployed by the service provider.

As with voice and telephony, video-based services should not require end-users to upgrade all of their equipment to support a digital data only delivery mechanism. Using video gateways in the premises to convert and deliver standard video signals to existing TVs and receivers, the network can control ingress and egress of traffic and still remain open.

Service providers benefit from these common interfaces as well as end-users. If a retail service provider was required to build a head-end, integrate the middleware and digital rights management and purchase and deploy their own residential video gateway, then the barrier to enter the video market on the open access fiber to the premises network would be too high for all but the most resource rich providers. By integrating these functions, based on global standards, into the design and scope of the municipal open access fiber to the premises network, content providers who do not have any interest in those facilities can still be able to deliver services to the end-user.

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The decision to incorporate certain services layer functionality demonstrates an open service provider network owner’s engagement in ensuring an open and competitive environment across the shared infrastructure. By no means should a network owner prohibit resource rich providers from deploying their own head-end or other facilities based services. However, the economic development and other public policy interests of the project may drive owners to extend service availability to a larger number of competitors.

3.2.4.5.3.4 Capacity Management The correct operations model is more important to the success of a municipal network than is any particular technology decision. Once an operational model is selected and the technology has been chosen and deployed, the business of asset management, and in particular capacity management, becomes the architect's primary focus. With the utter failure of the mystical, metaphysical, and alchemical industries to deliver a working crystal ball, most engineers find they are only able to guess at the actual demands and performance of the network or determine how the infrastructure is going to behave with the deployment of advanced services. Using imagination and a good spreadsheet, planners can make a few basic assumptions to illuminate the potential capacity issues infrastructure might experience.

An overview of a typical municipal deployment covering roughly 200,000 homes shows the four main paths along which traffic will flow through a cascading aggregation topology.

Non-Local Terminate Aggregate P2P III

Mediate Interconnect P2P II

P2P I 15 Tbps Lit Switch Capacity 10+ Tbps Lit Port Capacity

Figure 28: Cascading Aggregation

Terminate traffic or P2P I traffic is localized within a given footprint (about 900 addresses or 360 subscribers at a 40% take rate) and is limited primarily by the port speed and the ADS device backplane.

Aggregate or P2P II traffic is between devices within a community (up to about 30,000 addresses or 12,000 subscribers at a 40% take rate) and is limited by distribution ring capacity and the DCS devices.

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Mediate traffic or P2P III traffic is between devices anywhere on the network and is limited by core ring capacity and the performance of the RCS devices within the distributed core.

In a network the size of San Pablo, the City functions as the aggregate point with mediate traffic design coming into play as the City works with other communities in the area. We recommend designing the network to allow the point of presence established in San Pablo to function as a core mediate node rather than limiting the design to only accommodate aggregate traffic.

In order to fully capitalize on the traffic management properties of cascading aggregation (to achieve the traffic patterns depicted above) and maximize the network's capacity for future services, service provider peering must be in place. Without service provider peering, a device from one resident service provider's customer communicating with a device from another resident service provider's customer must traverse all levels of cascading aggregation, leave through the one service provider's interconnect, re-enter the network on the other service provider's network and again traverse all levels of cascading aggregation thus behaving as non-local traffic. Implementing service provider peering will:

 Mitigate Cascading Aggregation Point Traffic. Without service provider peering all inter-service provider traffic must traverse the entire network. This requirement forces unnecessary traffic onto the aggregate, mediate and non-local levels of the cascading aggregation model.  Reduce Service Provider Interconnect Costs. Without service provider peering all inter service provider traffic must flow through both service providers' interconnect points. Most service providers pay for their interconnect in steps based on the amount of throughput they require. The more services they can provide their customers "on net," the more manageable their interconnect costs become.  Encourage High Intensity Bandwidth Application Development. Without service provider peering, high intensity bandwidth applications are loosely limited in availability to only the developing service provider's subscribers. With service provider peering, the potential user base for high intensity bandwidth applications opens up to all fiber subscribers. The larger user base should help encourage development of distinct high intensity bandwidth applications.

Service provider peering does not come without its challenges. Nonetheless, the advantages are great.

One method for analyzing capacity is to break potential services into three groups: existing, imminent, and possible. Each service should be given defined characteristics that allowed a general impact assessment on the network. The typical usage cycle, bandwidth required, and traffic connectivity (point to point and level of locality) are sufficient to discover some relatively obvious conclusions.

Advanced services are defined only for the purposes of stressing the network resources. An analysis can be performed by network layer to discover which layers would need reinforcing based upon various services mixes and associated traffic patterns. By introducing different scenarios of service penetration evaluators get a sense of how the links between the layers in the network are stressed beyond their initially planned levels.

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As results of an analysis are reviewed, evaluators will note that the bandwidth available on the dedicated link to the home, with only one subscriber sharing that link, is the least likely portion of the network to fail. Typical service penetration scenarios will show adequate capacity. Evaluators will most likely conclude that the most difficult part of the network to change - the portion deployed to every end point - will be the last part of the network to require an upgrade. As would be expected, the more subscribers that share the network resources, the more likely it is that that portion of the network will require the deployment of additional, more advanced technologies. Evolving the connections between switches in the core of the network from a 20 Gbps link to an equivalent of a 200 Gbps link is likely to be the most important evolution after the initial deployment of the network resources has been accomplished.

3.2.4.5.4 Design Considerations: Design Overview Having established clear criteria and standards, let us now present a design overview. This design overview will look at the physical components and the logical components.

3.2.4.5.4.1 Physical Components “Figure 29: Conceptual Network Overview” provides a graphic representation of the network’s architecture.

Figure 29: Conceptual Network Overview

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The conceptual network overview presents the following elements:

A. Core (Data Center) The network core consists of Regional Core Switches (RCS) located in regionally diverse locations. They are interconnected with 10GigE interfaces. Each is connected to at least two other RCS devices so that if any RCS fails or loses connectivity, the core network is able to operate without interruption. The regional core is designed for mediate traffic. While San Pablo by itself is too small to necessitate a meshed regional core, we recommend designing the proposed San Pablo Plaza hub site in such a way that it can easily be upgraded to be a regional core site as more cities in the area follow San Pablo’s municipal broadband development example. Service providers inter-connect with the network at any of the RCS or DCS sites and may also co- locate their routers and switches that they use to interface with the network connection at these locations. The primary interface for a service provider is typically a GbE port. Service providers in some cases interconnect in multiple locations, and are encouraged to do so for redundancy.

B. RCS/DCS (Hub) To ensure geographic diversity and minimize expense, some RCS devices are installed at regional hubs instead of in carrier hotel data centers.

C. Interconnect Rings The architecture uses a model of cascading aggregation to help ensure reliability and to provide optimum traffic management. Interconnect rings connect non-contiguous network areas making the regional nature of the network transparent to retail service providers. Core rings connect the multiple RCS devices to each other. Interconnect rings and core rings often times parallel each other. The immediate design of the San Pablo network does not require any interconnect rings. They are included in this design overview in order to accommodate future regional growth of the network.

D. DCS (Hub) Distribution Core Switches (DCS) are placed in each distribution hut or co-location facility and are used to aggregate distribution connections from one or more regions. They are installed in pairs and each will eventually connect back to a separate RCS with 10GigE on physically diverse fiber paths. The pairs are also connected to each other with 10GigE to provide a redundant path in the case of an upstream failure for one of them. Smaller DCS devices can be used as a Point-of-Presence (POP) in data centers and co-location facilities to provide service provider, exchange carrier, and other interconnects in strategic locations.

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E. Distribution Rings Distribution ring architecture is the next level of cascading aggregation within the physical network. Distribution rings connect multiple cabinet sites (with their ADS devices) to the hub sites hosting their parent DCS devices.

F. ADS (Cabinet) The project area is divided into a number of geographic areas of between 1,000 and 2,000 potential subscriber premises. We refer to these geographic areas as footprints or service areas. Within each footprint is a single community cabinet that houses Access Distribution Switches (ADS) that serve all of the subscribers within the footprint. These ADS devices are connected back to the nearest DCS pair with two GbE connections (one in each direction on the physically diverse distribution fiber ring) that provide physical path redundancy to each ADS. Additional GbE connections are added as additional bandwidth is needed. The ADS devices provide Fast Ethernet 1GbE capable connections to each customer and aggregate those connections together to multiple GigE uplink connections. 10 GbE and higher capacity is also available from the community cabinet.

G. Access Fiber Access fiber distributes the network from a community cabinet (ADS device) to the individual subscriber addresses.

H. Subscriber Splice Case Until an address subscribes to service, the termination point for the potential customer is the subscriber splice case, also known as a customer access point or CAP. The subscriber splice case is a specialized splice point. All CAPs are splice cases but not all splice cases are CAPs.

I. Drop Drop level infrastructure extends the network from the subscriber splice case to the premises demarcation and is placed when an address subscribes to service. In our previously discussed road analogy, the drop represents the driveway.

J. Access Portal The Access Portal (or AP – referred to as and Ethernet Demarcation Device (EDD) or Optical Network Terminator (ONT) on some projects) in the proposed network serves as the demarcation point to the service provider’s customer. This device is configured by the network manager as requested by the service provider. Typically configuration involves a port for the service provider’s data VLAN, a port for their voice VLAN, and four ports for the service provider’s video VLAN, with appropriate rate limits and prioritization for each type of service. This model allows a customer to obtain services from multiple service providers simultaneously using the same fiber connection in any combination supported by the 1 Gbps connection. The service provider is then responsible for the customer premises equipment devices (i.e. IPTV set top boxes, phone adapters, etc.) and services that are

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delivered to the customer. The network manager provides a granular interface to the AP for service providers that includes link-state information, VLAN configuration, MAC address table, traffic statistics, and other useful information and allows for basic troubleshooting by the service provider’s technicians. Each AP can be connected to an Uninterruptable Power Supply (UPS) with a 4-hour life. The CPE and UPS are typically mounted inside the home in a utility room or near the telephone demarcation.

K. CAT5 Wiring Services are distributed within the home via CAT5 wiring or through some conversion methodology that allows IP based services to function on another existing media.

L. Set Top Box (and other CPE) IPTV services are converted for use on televisions through the set top box or STB. Voice services are converted through a terminal adapter or TA. Other advanced services (like medical monitoring and home security services) may require additional customer premises equipment or CPE.

3.2.4.5.5 Design Considerations: Logical Overview To meet the design considerations already established, the Core and Distribution network will be designed and configured in a Multiprotocol Label Switching (MPLS) mesh. This MPLS mesh creates a cloud where Virtual Private LAN Services (VPLS) are configured as point-to-point, point-to-multipoint, and multipoint-to-multipoint network circuits. A service provider interconnect is configured with multiple point-to-multipoint connections (one each for Data, VOIP, Video, etc) to their customers. At the DCS-ADS connection, the VPLS service has an exit point where the traffic is encapsulated into the specific VLANs for that service providers services. The services then traverse these VLANs to the AP, where it strips the VLAN tags and delivers the services, untagged, to the customer facing ports. The result is that the service provider is provided with a layer-2 tunnel per service, to each of their customers.

Physical Device Path of Services

Service Provider Core Distribution Access AP

Router/Computer

IPTV STB Router, Allied VOIP Switch, Alcatel OS-6400 Alcatel 7450 Alcatel 7450 iMG606BD IPTV ESS-7 Headend ESS-12

Service Provider Perceived Path of Services Municipal Network Service Provider FastEthernet Copper VLAN1 Router/Computer FastEthernet Fiber VLAN Trunkport VLAN2 GigE Fiber Router, IPTV STB 10GigE Fiber VLAN3 VOIP Switch, IPTV Headend Phone Adapter

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Figure 30: Physical vs. Logical Service Paths

3.2.4.6 Public-Private Partnership Evaluation  Open and Wholesale A properly designed public-private partnership can be open and wholesale.  Carrier-Class A properly designed public-private partnership can be carrier-class.  High Scalable Bandwidth A properly designed public-private partnership can offer high scalable bandwidth.  Open and Independent Architecture A properly designed public-private partnership can be based on an open and independent architecture.  Alignment with Policy Objectives If the public partner retains a significant role in the partnership (e.g., if the public partner retains ownership of the physical infrastructure), the public partner will be able to more fully control the public policy outcomes.

In sum, of the broadband development options available to the City of San Pablo, the option that appears to best meet the City’s needs is a properly executed public-private partnership.

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4 Operations Plan To develop an operations plan, we will first apply design considerations to ground conditions found in San Pablo. From this high level design, we can apply costs over time. Next, we need to project revenues by estimating average revenue per unit and projecting take rates over time based on market conditions and marketing plans. In the proposed public-private partnership, operational costs are the responsibility of the asset manager. The asset manager is allocated a fixed fee and must meet the network owner’s service level expectations.

With and understanding of projected capital expenditures, projected revenues, and controlled operations expenses, we can develop financial projections.

4.1 Capital Cost Estimates To establish a projected budget for the project, completed a preliminary design with the help of an outside plant design firm based on the design guidelines established in this report. We first laid out proposed distribution rings winding through many of the City’s business districts.

Figure 31: Potential Distribution Rings (in pink - city boundaries in red)

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With distribution rings in place, we then divided the City into six proposed footprints or service areas ranging in size from about 1,000 to about 2,000 potential subscribers (see “Figure 5: Six Potential Footprints/Service Areas” below).

Figure 32: Six Potential Footprints/Service Areas

In addition to the OFAP principles described earlier, proposed footprint boundaries take into consideration natural boundaries or construction obstructions.

In order to estimate units, we subsequently laid out a potential fiber design in one of the service areas (see “Figure 6: Potential Layout for a Footprint/Service Area” below).

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Figure 33: Potential Layout for a Footprint/Service Area

Detail of the preliminary design can be found in the accompanying “San Pablo.kmz”.

Data generated for the primary ring design and the potential service area layout were then extrapolated to the entire City.

We applied unit pricing garnered from our experience around the nation to the extrapolated data. In doing so, we found significant cost differences between directional boring and microtrenching (refer to “Table 4: Capital Cost Estimate” below).

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Figure 34: Directional Boring along El Portal in San Pablo

Microtrenching, on the other hand, uses a saw to cut a small trench (a “micro” trench) in which to place conduit (see “Figure 8: Microtrencher” below).

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Figure 35: Microtrencher

Microtrenching is significantly less expensive than directional boring or traditional trenching but microtrenching and directional boring both have their pros and cons.

Pros Cons Directional Boring • Places infrastructure 24” or • More costly deeper • Takes more time • Causes minimal road disruption • Is more common and therefore easier to find crews Microtrenching • Lower cost • Creates small cut in roadway • Faster implementation • Places infrastructure at 12” to 24 “ • Fewer experienced crews Table 17: Directional Boring vs. Microtrenching

After making a determination as to whether or not microtrenching will be permitted and after completing actual design work for the city, we will be able to develop a much more accurate capital cost estimate.

We interviewed representatives from Tetra Tech Construction so that we could have a better understanding of the differences between microtrenching and directional bore construction techniques. Tetra Tech is happy to meet with City representatives to help the City establish appropriate permitting requirements needed to support microtrenching.

4.2 Market Conditions As we turn our attention to market conditions, we will define the industry – including a summary Porter’s Five Forces Analysis, describe market segmentation and possible actions across market

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October 14, 2015 SAN PABLO BROADBAND PLANNING segments, present an overview of competition in the marketplace, and address our market research and marketing strategy.

4.2.1 Industry Description

4.2.1.1 Industry Overview Investopedia provides “The Industry Handbook: The Telecommunications Industry”37. The following industry overview relies heavily on the Investopedia article but has been modified to be more relevant to the San Pablo project.

Think of telecommunications as the world’s biggest machine. Strung together by complex networks, telephones, mobile phones, and Internet-linked PCs, the global system touches nearly all of us – some more effectively than others. It allows us to speak, share thoughts and do business with nearly anyone regardless of where in the world they might be. Telecom operating companies make all this happen.

In spite of deregulation, beginning in earnest in the early 1980’s, the telecommunications industry is still dominated by a club of big national and regional operators. On the cable television side of telecommunications, Comcast and Time Warner Cable claim 55% of all wireline cable subscribers. The third largest player in the wireline cable service industry, Cox Communications, only has 7.5% of the market share. In broadband, Comcast, AT&T, and Time Warner Cable combine for nearly 58% of the market share. The fourth largest broadband provider, Verizon, claims 11% of broadband subscribers and no one else breaks double digits. In cell phones, Verizon and AT&T Mobility both have over 108 million subscribers. The third largest cell phone provider, T-Mobile, only claims 55 million subscribers. The third through eighth largest providers (T-Mobile, Sprint Nextel, TracFone Wireless, MetroPCS, US Cellular, and Cricket Wireless) have a combined subscribership of 129 million subscribers – only 60% of the two big carriers’ combined market share. Traditional landline business is dominated by what remains of the Bell operating companies after divestiture separated them and mergers and acquisitions brought them back together. AT&T, Verizon, and CenturyLink account for 89% of all landline telephone service in the U.S.

In the San Pablo broadband market, concentration is magnified. Comcast dominates with an estimated 72% of the market and with AT&T carrying and estimate 24%. Any choice outside of these two giants businesses and residents may have often depends on one of them for middle mile transport and often for last mile infrastructure as well.

Telecom is less about voice and increasingly about text, images, and tele-presence. High-speed Internet access is quickly becoming the staple of the industry replacing the long standing dominance of voice services. Fiber optics provides the best capacity and, with adequate redundancy, reliability for this 21st century tool of commerce, education, entertainment, and communication.

37 http://www.investopedia.com/features/industryhandbook/telecom.asp#axzz25hKTRpTw

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Of all the broadband customer markets, residential and small business markets are arguably the toughest. Competitors rely heavily upon price to slog it out for households’ monthly checks; success rests largely on brand name strength and heavy investment in efficient billing and customer support systems. The corporate market remains fairly lucrative; though competition is eroding historic margins for big business services.

Telecom operators also make money by providing network connectivity to other telecom companies that need it, and by wholesaling circuits to heavy network users like Internet service providers and large corporations.

It is hard to avoid the conclusion that size matters in telecom. It is an expensive business; contenders need to be large enough and produce sufficient cash flow to absorb the costs of expanding networks and services that become obsolete seemingly overnight. Transmission systems need to be replaced as frequently as every two years. Big companies that own extensive networks – especially local networks that stretch directly into customers’ homes and businesses – are less reliant on interconnecting with other companies to get calls and data to their final destinations. By contrast, smaller players must pay for interconnection more often in order to finish the job. For little operators hoping to grow big someday, the financial challenges of keeping up with rapid technological change and depreciation can be monumental.

4.2.1.2 Porter’s Five Forces Analysis 1. Threat of New Entrants. It comes as no surprise that in the capital-intensive telecom industry the biggest barrier to entry is access to finance. To cover high fixed costs, serious contenders typically require a great deal of cash. When capital markets are generous, the threat of competitive entrants escalates. When financing opportunities are less readily available, the pace of entry slows. In addition, it is important to remember that solid operating skills and management experience is fairly scarce, making entry even more difficult. 2. Power of Suppliers. At first glance, it might look like telecom equipment suppliers have considerable bargaining power over telecom operators. Indeed, without high-tech broadband switching equipment, fiber-optic cables, and billing software, telecom operators would not be able to do the job of transmitting voice and data from place to place. But, there are actually a number of large equipment makers around. There are enough vendors, arguably, to dilute bargaining power. The limited pool of talented managers and engineers, especially those well versed in the latest technologies, places companies in a weak position in terms of hiring and salaries. 3. Power of Buyers. With increased choice of near replacement telecom products and services, the bargaining power of buyers is rising. Let’s face it; telephone and data services do not vary much, regardless of which companies are selling them. For the most part, basic services are treated as a commodity. This translates into customers seeking low prices from companies that offer reliable service. At the same time, buyer power can vary somewhat between market segments and geographic areas. In much of the U.S. telecom services are provided by predominant multi-state corporations for whom the loss of a small market is not a significant threat. Furthermore, while switching costs are relatively low for residential telecom customers, they can get higher for larger business customers – especially those that rely on more customized products and services.

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4. Availability of Substitutes. Products and services from non-traditional telecom industries pose serious substitution threats. Cable TV, satellite operators, wireless and cellular companies all compete for buyers. Railways and energy utility companies are laying miles of high-capacity telecom networks alongside their own track and pipeline assets. 5. Competitive Rivalry. Competition is “cut throat”. The wave of industry deregulation together with the receptive capital markets of the late 1990’s paved the way for a rush of new entrants. New technology is prompting a raft of substitute services. Nearly everybody already pays for phone services, so all competitors now must lure customers with lower prices and more exciting services. This tends to drive industry profitability down. In addition to low profits, the telecom industry suffers from high exit barriers, mainly due to its specialized equipment and regulatory obligations. Networks and billing systems cannot really be used for much else, and their swift obsolescence makes liquidation pretty difficult. The industry has reacted to “cut throat” competition by establishing service areas protected by “gentlemen’s agreements” precluding competitive entry and by consolidating; creating very high market concentration.

4.2.2 Market Segments We perceive broadband service offerings in two ways: 1) what does the network offer service providers? and 2) what do service providers offer retail customers because of the network? For both wholesale and retail products, we find the open access fiber to the premises market can be segmented into business, residential, transport, and other market segments.

BUSINESS RESIDENTIAL TRANSPORT OTHER Operator Services / DSL Replacement Residential Overbuild Short-Haul Transport Wholesale Services T1/DS3 Replacement Greenfield/In-Fill Long-Haul Transport Boutique Monetization Enterprise MDU Brokered Services Other Opportunities Figure 36: Market Segments

These market segments are not necessarily intended to determine pricing schemes. Generally, pricing must be established around product differentiation – not customer differentiation. Many incumbents build pricing schemes around customer type as opposed to product differentiation, charging business customers higher prices than they charge residential customers for the very same product. This tendency is a holdover from the days when regulators fixed prices for some customer classes (e.g. residential customers) and not for others (e.g. business customers). In this regulated environment, the service provider may have had residential service price caps that forced very thin profit margins. The service provider would subsidize their low residential service margins by charging business customers three, five, ten times or more for similar service. As part of their effort to begin allowing competition into the telecommunications marketplace, regulators sought to compensate the de facto subsidization of residential and rural accounts with business and urban accounts with the de jure subsidization of the Universal Service Fund. Because the market was accustomed to arbitrage pricing schemes, competitors would ignore the low margin residential markets and aggressively attack the high margin business market – where they could charge slightly less than the incumbent and still make a healthy profit. As

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The market categories help determine the product characteristics required in the marketplace. Revenue potential in each market segment for each product helps determine product development and implementation prioritization. The market segments also help organize marketing and sales efforts.

The open access model requires that most of these market segments be addressed from a wholesale perspective. However, in some instances, the network owner may also function as one of the competing service providers. Furthermore, the network owner must help its participating retail service providers succeed. The network owner must always consider retail ramifications of its actions within the various market segments.

The scope of the business and residential markets are determined by the number of addresses passed. As part of our proposed completion of engineering, we will collect detailed address information. As a general rule of thumb, in market areas large enough to sustain an open access overbuild, 90% of addresses are residential and 10% are business. Based on our initial summaries, San Pablo has an estimated 8,800 residential addresses and 1,400 businesses addresses or a 86%/14%. In the business market segment, about 85% of potential subscribers are DSL replacement, 10% are T1/DS3 replacement, and enterprise customers represent about 5%. In the residential market place, about 59% of addresses passed in San Pablo are single family units (or SFUs) and about 41% are apartments or other types of multi-dwelling units (or MDUs).

Count Percent Residential 8,800 86% SFU (including Mobile homes) 5,150 71% MDU 3,650 29% Business 1,400 14% DSL Replacement 1,190 85% T1/DS3 Replacement 140 10% Enterprise 70 5% Table 18: San Pablo Address Breakdown including Nearby Homeowners’ Associations

4.2.2.1 Business Subscriber Market Segment The business subscriber market segment can be subdivided by the general type of data services required. Business services are typically DSL replacement, T1/DS3 replacement, or enterprise services.

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Characteristics Challenges and Strategy

Opportunities Business customers with a Often times expensive to Develop alternative last few computers with install and because of mile delivery limited data price sensitivity difficult mechanisms (DSL and requirements; fairly price to recover cost of wireless) to reduce DSL Replacement sensitive. installation. installation costs and expand the market presence while fiber is being built. Significant bandwidth and Even with competition Thoroughly inventory reliability needed to wearing down the potential subscribers and support business arbitrage opportunity, carefully track sales; customers with multiple this still represents the focus brand development workstations and best market segment for on this segment of the significant online work. revenue for competitive business market. T1/DS3 Replacement overbuilders. The open access network should allow network owners to bring service providers to the customers that the customers are comfortable with. Business customers with Telecommunications The enterprise market is very demanding purchases are frequently difficult to enter and may Enterprise professionally managed handled by staff located best be attacked through telecommunications outside of service area. agents. environments. Table 19: Business Market Segment Summary

4.2.2.1.1 DSL Replacement BUSINESS DSL Replacement Typically, 85% of businesses in the business market segment are interested in DSL-sized and priced data transport – that is, they currently use 5 to 20 Mbps to run a few computers. They typically use their data transport for credit card processing, online purchasing, online accounting, and other relatively low bandwidth demand services. These applications typically do not require high quality of service or other revenue generating add-on features.

Historically, fiber to the premises networks have struggled to serve this market. Network owners and asset managers want businesses to demand bandwidth that justifies the fiber network. Most of the DSL replacement business market segment simply does not require the bandwidth fiber can provide. Furthermore, the characteristics of a DSL replacement and the competitive pricing of current DSL

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4.2.2.1.1.1 Some DSL Replacement Strategies Some strategies that may be effective pursuing the DSL replacement market may include:

 Provide services to hard to reach businesses and businesses outside the completed construction area via a wireless overlay or with DSL supported by the local incumbent’s last mile infrastructure.  Pursue businesses in strip malls or other multi-tenant buildings where one drop level construction effort can be used to serve multiple businesses with an intermediary switch or other shared CPE within a multi-tenant unit that allows multiple subscribers to be served from a single drop level asset.  Nurture relationships with well-known providers in the area. The open access architecture can bring those service providers with strong name recognition to potential subscribers improving the probability of securing and retaining the customers.

4.2.2.1.2 T1/DS3 Replacement BUSINESS T1/DS3 Replacement The business market segment includes some customers who are interested in T1/DS3 and larger sized and priced data and voice transport – typically requiring 20 Mbps or more. These businesses support multiple computers and have certain work functions that are dependent on bandwidth capacity and reliability.

Open access fiber to the premises usually performs extremely well in this market segment. The businesses interested in T1/DS3 replacements are usually aware of the need for installation costs and have a higher tolerance for them than do DSL replacement customers. T1/DS3 replacement customers are often grouped near each other in business parks or other zoning-based clusters. Businesses in this market segment frequently require quality of service or other add-ons that can generate additional revenue for service providers and network owners.

4.2.2.1.2.1 Some T1/DS3 Replacement Strategies Network owners/asset managers should inventory all T1/DS3 replacement candidates in the target market area. The network owner can then help service providers aggressively pursue this market starting with geographic clusters near early completion infrastructure. All efforts to capture this market must be carefully tracked and monitored.

Often a single sale in this market segment results in multiple locations. Customers’ remote sites must be tracked and this information used to help inform construction prioritization.

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The open access business model allows network owners to bring well known service providers to the potential subscribers. Bringing better known brand name service providers or service providers the potential subscribers have done business with before may contribute to higher take rates.

An important sub-segment of the T1/DS3 replacement market is community anchor institutions or CAIs. CAIs are government offices, schools, hospitals, fire and police stations, and other institutions designed to support the community. These institutions frequently comprise multiple locations.

4.2.2.1.3 Enterprise The business market also includes customers who are interested in enterprise, or a fully integrated suite, of services. These customers can be very demanding but also generate very good returns through significant value adding add-on purchases.

Most enterprise customers require the selection and integration of products from multiple service providers – both those participating and not participating on the network owner’s open access network. Often times a third party integrator is required to package and sell these suites of integrated services. Enterprise customer sales are characterized by:

 They often have a long lead time. As the enterprise works at migrating from existing services or integrating new services into their enterprise environment they may delay purchase or limit the scope of their purchase.  They require high levels of trust. That is, enterprise customers are more apt to go with a well- known entity in the marketplace over a new entry. The saying, “No one ever got fired for buying Cisco” characterizes this trust level requirement.  They are frequently controlled by a source outside the local area. This outside purchasing can be detrimental to local fiber to the premises networks as the non-local purchasing controllers will likely pursue network owner vendors they are familiar with.

4.2.2.1.3.1 Some Enterprise Strategies To capture enterprise customers network owners may need to recruit and support business channel partners. Many business subscribers – in all business market segments – have established relationships with third party value added resellers. Rather than competing with these relationships, network owners and asset managers should work to co-opt them. To do so, they must create a business channel partner sales program that rewards the third-party resellers for bringing the best possible network, the fiber network, to their clients.

4.2.2.2 Residential Market Segment Many projects – especially those beginning as high value target projects or modest pilot programs underplay the importance of the residential market. The residential market in an overbuild environment is characterized by thinner margins, stiffer competition, more infrastructure need, and other issues making it less attractive than the business market. However, the residential market represents significant opportunity for volume and network effects.

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The residential market can be segmented into residential overbuild, greenfield and in-fill development, and apartments or multi-dwelling units (MDUs).

Characteristics Challenges and Strategy

Opportunities Represents typical Cost of infrastructure per A strong mix of marketing suburban deployments. unit passed is high – methods and tactics Residential Overbuild especially compared to should be implemented revenue potential. to capture the largest possible audience. Network deployment is Most developments have Ensure greenfield/in-fill done in conjunction with long lead times. Property deployments are only one a property developer. developers typically tie strategy and that their Greenfield/In-Fill their schedules to long lead times can be occupancy which may accommodated with result in extended ramp other revenue streams. times. Apartment complexes, Are often difficult to build Network owners should condominium complexes, in. If there is not a single focus on bulk sales or and other high density or property manager that apartment complexes group housing can sign a contract for all where every unit MDU environments. units can be difficult to subscribes. Individual build a subscriber base. MDU sales are very Renters tend to turn over difficult to manage and more quickly than can be quite costly to owners. install. Table 20: Summary of Residential Market Segment Characteristics

4.2.2.2.1 Residential Overbuild RESIDENTIAL Residential Overbuild The residential overbuild market represents about 70% of all possible subscribers and, thus, the largest revenue opportunity. However, residential overbuild subscribers must be won one at a time and the total cost of acquisition for a residential overbuild subscriber is high compared with the monthly revenue generated creating very long payback periods.

4.2.2.2.1.1 Some Residential Overbuild Strategies Network owners and retail service providers should use a mix of traditional marketing methods, retail outlets, and neighborhood fiber advocacy to reach out to the residential overbuild market. In the wholesale/retail split model, network owner revenues come from participating service providers. However, revenues are ultimately generated from sales made to subscribers. The network owner, asset manager, and service providers must be ready to support service provider direct sales, reseller opportunities, neighborhood fiber advocacy, and other sales models. We will discuss marketing methods in more detail in the “Market Research and Marketing Strategy” section below.

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4.2.2.2.2 Greenfield/In-Fill RESIDENTIAL Greenfield/In-Fill The greenfield/in-fill market (or developer model market) is defined by cooperation with property developers who install (or allow to be installed) network elements as they develop their property. This cooperation usually requires some compensation from the network owner in the form of up-front payments, residual payments, or both. Property developers may also seek service discounts they can pass on to their future tenants and home owners.

In the greenfield/in-fill market, network owners partner with property developers in any one of several models. Frequently, an arrangement is struck where the developer places required network infrastructure during initial construction (including drops, and CPE) and the network owner reimburses the developer over time.

Some whole companies base their business model on residential greenfield/in-fill. This is a dangerous strategy. The developer model is hampered by the unreliability of the housing market. Property developers often have grand plans that take years to unfold – if they ever do. Developments that do produce subscribers typically require significant initial infrastructure investment to establish service in the new construction area. This investment is often followed by a long period of marginal revenues as units are sold and eventually built.

Network owners and developers in these bulk sales developer model environments are frequently tempted to undermine the value of an open access network. In their effort to recover infrastructure costs and generate profit, most developers engaged in this model attempt to negotiate bulk deals with individual service providers that involve revenue sharing. This behavior locks competing service providers out of the development. Network owners should counter this behavior by striking wholesale discounts and allowing multiple service providers the opportunity to take advantage of the discounts and pass them on to the subscribers in the development.

San Pablo only has limited greenfield/in-fill opportunity. Nonetheless, it is important to ensure broadband infrastructure is included in all redevelopment plans.

4.2.2.2.3 MDU RESIDENTIAL MDU The residential MDU market is characterized by high concentrations of renters (or, sometimes condominium owners) in units that frequently require access to a non-subscriber’s unit in order to deploy infrastructure to the subscriber’s unit. Deployment to MDU’s also usually requires property access to common property often managed by a non-resident owner or property management organization.

San Pablo has a high percentage of MDU’s.

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The strategies for capturing MDU business focuses first on working with the property owner or property manager to try to get universal installation – preferably with universal subscription. Service discounts for “bulk” purchases may be offered to entice universal subscription. Failing to win universal installation, universal property access should be the goal. Because, in a competitive environment, access to a subscriber often requires traversing a non-subscriber’s premises, it is good to have easement or property access rights to do so before beginning to sell service on the property.

If the network owner/asset manager is unable to secure universal property access through universal subscription, universal installation, or a universal property access agreement, it is likely to be inordinately difficult to sell service on the property.

4.2.2.3 Transport Market Segment Transport services represent the business of carrying bits from one point to another. Transport services can be used to link two disparate offices of the same company, to connect a company to its off-site storage, to provide transport for service providers or for many other functions. The geography required to capture enough addresses to have sufficient scale often creates a good market for transport services. Transport services can be characterized as short-haul transport and long-haul transport.

Characteristics Challenges and Strategy

Opportunities Short-haul transport The high capacity Short-haul transport represents regional point redundant rings required represents regional to point data transport. for open access fiber to network owners’ best the premises networks transport market Short-Haul Transport represent an offering segment opportunity. simply not available from traditional network owners. Long-haul transport Most regional network Network owners should represents extra-regional owners will have very build relationships with and interstate data limited long-haul extra-regional and transport. capability. Fortunately, interstate providers to the construction boom of offer long-haul transport. Long-Haul Transport the nineties produced significant capacity and it can usually be found fairly inexpensively when needed. Table 21: Summary of Transport Characteristics

4.2.2.3.1 Short-Haul TRANSPORT Short-Haul

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The very high capacity redundant fiber rings required to provide open access fiber to the premises represent an asset unparalleled by typical incumbent providers. This asset represents an opportunity to provide short-haul data transport directly.

Market surveys in San Pablo have exposed little need for short-haul data transport in the City. As the project grows to incorporate other communities, the short-haul market will grow.

4.2.2.3.2 Long-Haul TRANSPORT Long-Haul Some businesses need direct connections to offices or services outside of the region or the state. Data transport to support this need is called long-haul. In order for most regional open access providers to provide any long-haul services they will have to work with other providers. Fortunately, the fiber building boom of the mid to late 1990’s led to an overabundance of long-haul fiber and this type of cooperation is common in the telecommunications industry.

4.2.2.4 Other Market Segments Many other revenue opportunities exist for network owners outside of the traditional telecommunications market opportunities of residential, business, and transport.

Characteristics Challenges and Strategy

Opportunities An opportunity exists to Service providers require Network owners should provide wholesale a suite of retail services. focus first on developing services to non-facilities Network owners can wholesale data, voice, based service providers. build wholesale services and video services. Once Operator Services / with models to offer the network has a Wholesale Services functionality to retail sufficient subscriber base, service providers not the network owner ready to implement their should consider adding own solutions. wholesale boutique applications. Data and voice represent Boutique applications are Network owners should the anchor services any what can truly aggressively pursue service provider must differentiate a fiber partnerships with offer. In the residential network from its companies that have market, video is required traditional copper rivals. already done the work to Boutique Monetization as well. Fiber to the However, developing develop the technology premises enables boutique applications and market for boutique significant other services may be expensive and the applications. that are like boutique demand is uncertain. shops in a mall.

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Characteristics Challenges and Strategy

Opportunities Some service providers Network owners must be Neighborhood fiber require a broker to help able to sell competing advocacy and other Brokered Services with their sales. service providers’ mechanisms to broker services in a fair manner. services. One of the advantages of Advertisements may be Network owners must an open access network is another way to generate remain alert for other that the network owner revenue that have not yet revenue opportunities. Other Opportunities does not have to think of been fully explored. every way the network There are others as well. can produce revenue. Table 22: Summary of Other Revenue Opportunities

4.2.2.4.1 Operator Services OTHER Operator Services / Wholesale Services Network owners must deploy boutique applications to truly distinguish the fiber network from incumbent services. It is also valuable for network owners to lower the barriers of entry for new service providers on the open access fiber. In order to enhance these goals, network owners should implement a suite of operator provisioned services to be offered to service providers on a wholesale basis.

4.2.2.4.1.1 Some Operator Services Strategies At a minimum, the network owner should offer wholesale data, voice, and video products. These services function as the foundational core of network service and a system that cannot offer them effectively cannot compete. Most service providers will choose to build one or more of these basic services on their own but the network owner should always make them available so that boutique providers have a base they can return to.

4.2.2.4.1.1.1 Data The barrier to entry for data services is very low. However, by aggregating the demand of several service providers, network owners can get bulk discount rates not available to individual service providers.

4.2.2.4.1.1.2 Voice Voice over IP, or VOIP, services have matured significantly over the last decade. Service providers can find wholesale VOIP products from a number of vendors. There are some advantages to having VOIP services native to the network but the primary reason for the asset manager or network owner to implement a VOIP solution is simply to ensure it is available.

4.2.2.4.1.1.3 Video Video is a commodity product network owners must offer to compete in the residential marketplace. Because of licensing and head end requirements, video poses some fairly high barriers to entry. In order

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4.2.2.4.1.1.4 Other Services Network owners should mostly rely on service partners to bring other services (like security, gaming, home health monitoring, etc.) to the network. If insufficient progress is seen bringing new and differentiating services to the network, the network owner may have to ramp up research and development designed to enhance service offerings

4.2.2.4.2 Boutique Monetization OTHER Boutique Monetization The state of the art active Ethernet fiber to the premises networks deployed in the open access model enable significant new service offerings. Data, voice, and video are the network’s anchor tenant products but, like a shopping mall, great opportunity in specialty or boutique applications exists. Some boutique application ideas include tele-medicine, distance education, security applications, gaming applications, teleconferencing capabilities, remote desktop support, and others.

Boutique applications should magnify network effects and attract more customers to the network (as services become available on the fiber to the premises network that other networks cannot provide) and should generate new revenues.

Experience has shown two problems maximizing the benefits of boutique applications:

1. Boutique Application Development

Typically, service providers hesitate to step forward with significant developments in boutique applications. Development involves risk. Service providers must balance potential risks with potential reward. Virtual aggregation of multiple open access fiber projects may create a large enough marketplace to overcome the risks of new product development.

2. Monetization of Boutique Applications

In order to be useful, both service providers and network owners need to realize benefits from the monetization of boutique applications. Service provider monetization falls largely on their shoulders. Network owner monetization may be difficult to implement and to track and capture. All services on most networks are simply data services. If a provider is selling security services on the network, it looks like data to the network owner.

It may be possible to help resolve problems associated with both the development and monetization of boutique applications. Just like universities frequently have associated research parks, network owners can participate in developing boutique applications. They can help defray some of the service provider cost of developing boutique applications and in return, the service provider could enter a long-term revenue sharing agreement with the network owner/asset manager.

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4.2.2.4.2.1 Boutique Monetization Strategies Many opportunities may exist to monetize boutique applications. VLANs may make it possible for service providers to control access to the application. Third party billing may make it possible for the network owner to participate in revenues generated by boutique applications.

4.2.2.4.2.1.1 VLAN Control Controlling access to an application is often critical to billing for its use. Network owners may use their control over VLANs to help service providers control access to their boutique applications.

4.2.2.4.2.1.2 Third-Party Billing One possible mechanism to help realize revenue from boutique applications is to offer service providers a third-party billing option. In this model, the network owner or some other third party would do all the retail billing for residential services. The third-party billing service would then pay the network owner and the appropriate service providers. Pricing plans involve a fee for transport, plus a reasonable revenue share for applications offered over that transport.

Third-party billing provides:

1. Monetization of boutique applications. Using third-party billing, network owners can measure and realize revenue share opportunities from boutique applications.

2. Protection from service provider bad debt. Third-party billing eliminates the service provider’s opportunity to not pay the network owner.

3. Reinforcement of the open access/multiple service provider model. Open access network owners often struggle with identifying mechanisms to allow subscribers to select multiple services from multiple service providers. One key hurdle to overcome is that service provider billing often subsumes transport cost into the data service. Therefore, the data service provider bears the brunt of the cost. Network owners can overcome this hurdle by separating the transport billing from the services billing, but that would put the subscriber in the position of receiving multiple bills for a single service. Further, multiple services from multiple service providers currently means multiple bills. Consolidating residential retail billing in the hands of a third party may allow network owners to break transport out as a separate line item and allow single customer billing for multiple services from multiple service providers. This may enhance the subscribers’ service selection flexibility, improve customer choice, and reinforce the open access/multiple service provider model.

4.2.2.4.3 Brokered Services OTHER Brokered Services One of the strengths of an open access network is the choice among service providers the network offers subscribers. However, this strength is not one service providers tend to highlight. Recognizing

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October 14, 2015 SAN PABLO BROADBAND PLANNING this, network owners should participate in marketing efforts. If the network owner cannot close a sale, a window is created for the potential customer to change their mind. As the network owner markets the network and matures its marketing efforts into sales, they should close sales and generate commission revenue from service providers from these brokered sales.

4.2.2.4.4 Other Revenue Opportunities OTHER Other Opportunities Other revenue opportunities certainly exist on an open access fiber to the premises network. Some other revenue opportunities yet to be explored include advertising, sponsorships, content development, near-market add-ons, and so forth.

4.2.3 Competition In the San Pablo broadband market, primary fixed-line competition comes from AT&T and Comcast. Near replacement cellular competition comes from AT&T, MetroPCS, Sprint, T-Mobile, and Verizon.

4.2.3.1 Fixed-Line Competition Fixed services can be fixed wireless or wireline services like DSL, DOCSIS, or fiber. We found no fixed wireless providers in San Pablo. While we found a number of fixed-line providers, the market is dominated by AT&T and Comcast.

4.2.3.1.1 AT&T California

Contact: http://www.att.com Table 23: AT&T Summary

Based on a review of the AT&T web site and a text chat with and AT&T customer service agent, we were able to determine the following pricing:

Product Down/Up Promo Price Regular Price Reg $/Mbps Express 1.5/1 Mbps $25 Pro 3/1 Mbps $30 $46 $15.33 Elite 6/1 Mbps $35 $51 $8.50 Max 12/1.5 Mbps $40 $56 $4.66

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Product Down/Up Promo Price Regular Price Reg $/Mbps Max Plus 18/1.5 Mbps $45 $61 $3.38 Max Turbo 24/3 Mbps $55 $71 $2.95 Power 45/6 Mbps $65 $81 $1.80 Power 75 75/8 Mbps $75 Table 24: AT&T Packages and Pricing

 Promotional pricing is for the first 12 months of service.  Internet speed claims represent maximum network service capability speeds. Actual customer speeds may vary and are not guaranteed. Actual speeds vary based on factors including site traffic, content provider server capacity, internal network management factors, device capabilities and the use of other U-verse services.

4.2.3.1.2 Comcast

Contact: http://www.comcast.com Table 25: Comcast Summary

Based on a review of the Comcast web site and a text chat with and AT&T customer service agent, we were able to determine the following pricing:

Product Down/Up Promo Regular Reg $/Mbps Price Price Economy Plus 3/.768 Mbps $39.95 $13.31 Performance Starter 6/1 Mbps $29.99 $49.95 $8.32 Performance 25 25/5 Mbps $39.99 $61.95 $2.47 Performance 75/5 Mbps $44.99 $64.95 $0.86 Extreme 150 150/10 Mbps $114.95 $0.76 Extreme 250 250/20 Mbps $149.95 $0.59 Gigabit Pro 2000/2000 Mbps $299.95 $0.14 Table 26: Comcast Packages and Pricing

 Promotional pricing is for the first year.  Advertised speeds are “best effort” only.

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4.2.3.2 Near Replacement Cellular Competition Near replacement cellular competition comes from AT&T, MetroPCS, Sprint, T-Mobile, and Verizon. Cellular data packages vary greatly depending on usage caps, plans, and other factors. Cellular data pricing is not readily comparable to fixed-line service pricing.

4.2.4 Market Research and Marketing Strategy

4.2.4.1 External Demographic Indicator Survey According to conventional wisdom, characteristics that define the target demographic households in the residential marketplace include:

 Education. Better educated individuals and families tend to place a higher value on broadband.  Income. Low income and very high income households are difficult to capture. Low income households simply do not have the disposable income for services. With very high income households, it is difficult to create a decision point to even get the household to look at changing services to the fiber.  Time. Individuals and households with available leisure time are apt to purchase broadband for its entertainment and educational value.  Mobility. Individuals and families that move around are used to making telecommunications decisions. It is generally easier to create a decision event for these households.  Children. Households with small children often to not place a high value on broadband. As the children age and broadband services become more important to their education, the value increases significantly.  Alternative telecommunications purchases. Individuals who have purchased satellite television, wireless Internet, or other alternative telecommunications delivery systems understand the characteristics they are looking for in a broadband purchasing event.

Some of these characteristics are evident by external indicators. External demographic indicators may vary from community to community and so we have combined our external demographic indicator research in San Pablo with a market survey conducted by SRI (as per the discussion below). While indicators may be different from community to community, some of the signs visible from the street that have proven to show probable higher take rates include:

 Well-kept yards and well maintained property. Well-kept yards and well maintained property suggest income levels and lifestyles that allow for some leisure time. Leisure time can be diverted toward services available on fiber networks.  Signs of pre-teen and teen children. Pre-teens and teens tend to drive household telecommunications needs towards more advanced telecommunications services. Indicators of pre-teen and teens (like basketball hoops, inexpensive third cars in driveways or on the street, appropriately sized bicycles, etc.) suggest a greater need for advanced services and a higher likelihood of subscribing to fiber based services.

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 Evidence of recreational vehicles. Recreational vehicles (like motor homes, off-highway vehicles, camper trailers, etc.) suggest a neighborhood has income available to spend on things other than necessities.  Indicators of alternative communications purchases. If satellite dishes and wireless antennae are evident – especially in neighborhoods where cable modems and DSL are available – it is an indication that consumers have given more thought to their telecommunications purchases than in those neighborhoods that default to the traditional incumbents.

There are also indicators that suggest probable lower take rates:

 Evidence of small children. Small children have significantly different entertainment and education needs than pre-teens and teens. Households with small children tend to divert their resources to meet their growing children’s offline needs. Small children are suggested by the types of toys in yards, strollers on porches, car seats in cars, and other indicators.  Poorly maintained yards and homes. Poorly maintained yards and homes suggest limited leisure time. Neighborhoods that do not have the time to maintain their properties may not have time for online services.  Signs of a generally older population. Neighborhoods with generally older populations are indicated by health supplies (like oxygen tanks) on porches, older model vehicles, large numbers of elderly people out for walks or in their yards, and so forth. Elderly neighborhoods typically consist of older homes and often include smaller parcels. While some elderly communities have adopted advanced telecommunications services for tele-health services and other advances in quality of life, most generally do not subscribe to fiber services.  Indications of significant wealth. Neighborhoods that exhibit signs of significant wealth, like expensive cars, large homes, gated communities, private security forces, professionally maintained yards, and so forth tend to subscribe at lower rates than middle income neighborhoods. While they may be likely to subscribe to advanced telecommunications services, most residents in neighborhoods with significant wealth enjoy relatively good services and encounter few service change events.

As we completed an external demographic indicator analysis in San Pablo, we identified several trends:

 Homogeneity While the population of San Pablo is racially diverse, it appears to be financially relatively homogeneous. Some “micro” neighborhoods demonstrate signs of higher or lower incomes, but generally speaking these neighborhoods are fairly small.  Average to Low Income

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Most of the yards are reasonably well-kept, but there is a general lack of “extreme” landscaping. Most homes appear to have multiple vehicles, but generally they are older model vehicles. Some homes have recreational vehicles, but these vehicles are usually older.  Apparent Multiple Tenancy A key characteristic throughout the City is the large number of vehicles at each household. Throughout the City, a high percentage of households had two or more vehicles present both day and night. This suggests that there are at two or more adults in each household and that they are home at various times of the day. Either this suggests low employment (that is, two adults living in the household, but neither of them are working and, therefore, their vehicles are present day and night) or multiple tenancy (that is, more than two adults live in the home, but some vehicles are at work and others are at home) or both.  Low Indications of Leisure Time Generally speaking, indicators of leisure time, like extremely well-kept yards, recreational vehicles, hobby equipment, etc. were lacking.

Clearly, the project must take full advantage of these indicators of adoption (take rates) when the time comes to market municipal broadband to those in the business, non-profit, and residential sectors of San Pablo. That said, since (historically) take rates have typically turned out to range between 15% and 17 % (which is below the 20% break-even point), we will be employing a variety of proven relationship marketing strategies and tactics that will be designed to realize a minimum of “like market penetration” that, according to SRI’s market research, ranges between 45% and 53% for BOTH the business/commercial and residential market segments.

4.3 Financial Projections The following financial projections are based on a project schedule that progresses as follows:

 Detailed engineering and feasibility reevaluation.  Deploy core rings/distribution rings with service to business areas and adjacent residential parcels.  Stabilize operations and prepare for ubiquitous deployment.  Build service areas.  Operate and maintain the network.

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Table 27: Proposed High Level Project Schedule

Further, these financial projects are based on the assumption that the City proceed with a three-tiered public-private partnership business model in which the City functions as the network owner, the City uses a third-party asset manager to operate and maintain the network, and the physical infrastructure is made available to multiple private sector service providers. This assumption has significant impact on the City’s staffing plan. Using the three-tiered public-private partnership, the City has no need to change staffing to accommodate the new broadband infrastructure.

Finally, this financial modeling does not include debt service. The City is using a third-party to evaluate financing options and debt service models.

The accompanying “Modeling.xlsx” presents additional assumptions and allows for manipulation of variables that adjust outcomes. This allows decision makers to experiment with a variety of financial feasibility scenarios.

Based on the proposed schedule and the estimated capital costs, capital expenditures will be spread over just over two years with the heaviest capital spending occurring during the ubiquitous deployment:

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Capital Expense $- 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 $(500,000)

$(1,000,000)

$(1,500,000)

$(2,000,000)

$(2,500,000)

$(3,000,000)

$(3,500,000)

$(4,000,000)

Capital Expense

Figure 37: Projected Capital Expenditure Schedule

It is important to note that drop level infrastructure is included in these capital expenditures.

Revenue and operational expenditures will grow as the network expands and subscribers take service.

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Revenue $1,500,000

$1,000,000

$500,000

$(500,000)

$(1,000,000)

$(1,500,000)

$(2,000,000)

$(2,500,000)

$(3,000,000)

$(3,500,000)

$(4,000,000)

Capital Expense Operations Revenue

Figure 38: Revenue with Capital and Operating Expenditures

It is important to note that in the proposed three-tiered public-private partnership, the City is not responsible for covering operating expenditures. Operating expenditures will come out of the revenue stream. If the revenue stream is insufficient to cover operating expenditures, the asset manager should be responsible for covering any shortfalls.

This financial analysis suggests that the project should realize positive operational revenue (or EBITDA) of about $135,880 per month once the project stabilizes at target take rates.

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5 Conclusions and Recommendations After a thorough examination, we recommend the City of San Pablo proceed to the detailed design and feasibility re-evaluation stage of deploying a public-private partnership open access fiber to the premises network. We find the public-private partnership open access fiber to the premises model represents the best opportunity for the City to meet its broadband development public policy objectives. Further, we find that the market conditions suggest the project is financially feasible and will likely return revenue to the City in addition to meeting the City’s broadband development public policy objectives.

The present project may be best thought of as providing the ‘intelligence’ needed for making a ‘Go, No- Go’ decision for introducing Municipal Broadband to the City of San Pablo. It’s similar to the effort that precedes any major public policy decision.

In the present case, the findings are clear; it is a GO.

In other words, the findings from this comprehensive feasibility study are that developing a public- private partnership, open access fiber to the premises network in San Pablo is, indeed, feasible; in fact, it is one of the major drivers of realizing many of the City’s public policy objectives including, but not limited to: (i) Economic Development (attracting new business and commercial enterprise to the City, thus, creating new jobs for local residents), (ii) advancing health care in San Pablo through tele-medicine and other cutting-edge technologies, (iii) addressing the barrier known as the ‘digital divide’...plus many other objectives that are central to enhancing the quality of life for ALL San Pablo residents.

The next steps are:

• Complete Engineering

• The engineering cost estimate is $377,296 (at $1.75 per foot).

• Completed engineering will allow us to refine our capital cost estimates and identify any red flags in the project this study may not have uncovered.

• Re-evaluate Feasibility

• With engineering complete, we will have a much more precise picture of the cost to build the network. We will use these refined cost estimates to re-evaluate project feasibility.

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• Develop a comprehensive Public Outreach and Marketing Plan of Action

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6 Appendixes

6.1 Project Team This report was compiled by a coalition of exceptional professional services companies in the broadband industry. The team approach means San Pablo has received deep expertise across a wide-ranging spectrum of skill sets needed to plan, design, implement, and operate municipal broadband solutions.

6.1.1 OHIvey OHIvey, LLC is focused on the telecommunications revolution of the 21st century that is bringing unique solutions to municipal and other open access organizations deploying state of the art fiber optics to the premises networks in an open access model. The telecommunications future OHIvey sees stems from the growing groundswell of fiber optics to homes and businesses, built with public- private partnerships between municipalities, counties, cooperatives, non-profits and other “public” organizations and private enterprise. Public-private partnership open access fiber to the premises is a disruptive business model poised to reshape the telecommunications industry. Even though public-private partnership fiber to the premises is critical to the future of broadband deployment and services convergence, the model is not in the best interest of legacy network owners, it requires new companies and new thinking to implement.

Paul Recanzone, President

Paul Recanzone has 20 years of experience managing technical projects. For eight years he was associated with the Utah Telecommunications Open Infrastructure Agency (UTOPIA) as the lead project manager and in other roles. For the last seven years he has been providing professional municipal broadband consulting services. Paul has developed municipal broadband strategic plans, feasibility studies, project plans, business models, and performance measures.

Paul Recanzone was the lead author for this report.

6.1.2 Strategy Research Institute (SRI) SRI is a supplier of applied science for purposes of decision-making in both the public and private sectors. This includes policy research and consulting for agencies in the public sector and market research and consulting for firms and organizations in the private sector. The Institute also generates the “intelligence” needed to assist its two sister firms in servicing their respective clientele; those being:

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IMC Corp (Integrated Marketing Communications Corporation) and PAI (Political Action Institute). The Institute has been in business for nearly three decades.

SRI is comprised of a select team of applied behavioral scientists (both quantitative and qualitative researchers) and strategic planners. SRI’s researchers are proficient in the most up-to-date, advanced scientific methodologies and have advanced degrees from such academic institutions as U.C. Berkeley, The Annenberg School for Communication and Journalism at USC (University of Southern California), and NYU (New York University).

What sets SRI apart from other research firms and organizations is that they CONTINUE ON where other firms leave off. Specifically, most applied research firms provide only basic descriptive statistical analysis (percentages & cross tabs), while SRI goes beyond descriptive statistics to advanced, inferential, statistical analysis including, but not limited to, correlation analysis, factor analysis, regression analysis, and even causal modeling; thus, yielding far more accurate predictions of consumer behavior (e.g., “take rates”) and voting behavior.

SRI was involved in both FTTB (fiber to the business) and FTTH (fiber to the home) relatively early during the introduction of fiber optics to the marketplace. The research Institute, for example, designed and administered market research involving over 30 municipalities in Utah and Wyoming for the largest open access fiber (to the premises) project in the nation on behalf of DynamicCity MetroNet Advisors and the Utah Telecommunication Open Access (UTOPIA) network. Today, UTOPIA represents a consortium of 16 Utah cities that was created to provide construction and operation for a wholesale fiber optic telecommunications infrastructure.

G. Gary Manross, Ph.D., Chairman/CEO

A behavioral scientist, G. Gary Manross, Ph.D., has more than 25 years’ experience in market research and marketing consulting, as well as policy and political research and consulting…including strategic planning and implementation. His primary emphasis is in communication and social change, communication management, integrated marketing communications, and political communications. He is a known expert in Diffusion of Innovations; his Mentor and co-author was the “Father” of Diffusion Theory, Dr. Everett M. Rogers. Dr. Manross developed an adoption model called: Closing the Chasm, which is central to introducing new products (such as fiber optics) into the marketplace.

Prior to founding Strategy Research Institute, Dr. Manross held executive-level positions with the largest public relations agency in the world, Hill & Knowlton, Inc., and the largest state trade association in the

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United States, the California Association of Realtors®. He taught political communications at UCLA, media effects at USC, and was Associate Professor of Communications in the California State University system, where he taught communication research, advertising, and public relations.

Dr. Manross was the lead market researcher for this project.

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6.2 Sample Dig-Once Ordinance The following sample dig-once ordinance was developed for Colorado communities. It may be adapted to San Pablo’s needs.

MODEL OPEN TRENCH/DIG ONCE ORDINANCE38

WHEREAS, obstructions and excavations in City/Town/County rights of way disrupt and interfere with public use of the Rights of Way; and

WHEREAS, obstructions and Excavations in City/Town/County Rights of Way result in loss of parking and loss of business to merchants and others whose places of business are in the vicinity of such obstructions and Excavations; and

WHEREAS, it is desirable to adopt policies and regulations which will enable the City/Town/County of ______to gain greater control over the disruption and interference with the public use of public streets and Rights of Way, in order to provide for the health, safety and well-being of the City’s/Town’s/County’s residents and users of City/Town/County Rights of Way; and

WHEREAS, significant public funds have been invested to acquire, build, maintain and repair the streets within the City/Town/County, and Excavations in the Rights of Way reduce the useful life of the pavement infrastructure; and

WHEREAS, significant public funds have been invested to place and maintain Landscaping within Rights of Way in the City/Town/County and Excavations in the Rights of Way cause damage to, and increase the costs of maintaining that Landscaping; and

WHEREAS, at the present time, the City’s/Town’s/County’s Department of Public Works does not have [or desires to update, as appropriate] a detailed map or database indicating the location, nature, or extent of the system underground utility, communications and similar Facilities; and

WHEREAS, the various public and commercial utilities, broadband and communications providers and similar entities which install, maintain, and operate Facilities under the City’s/Town’s/County’s Rights of Way are constrained, from time to time, to make excavation cuts which degrade the surfaces of these Rights of Way, thereby reducing their useful life; and

WHEREAS, demand for access to broadband services is growing, and in order to fill such demand, more broadband network infrastructure is being installed in Rights of Way; and

38 This Model Open Trench/Dig Once Ordinance is intended as a starting point to address issues that local governments might include in their own rights of way codes. It may be considered as a separate ordinance or for inclusion in a more comprehensive ordinance government rights of way management, permitting and construction. All provisions relate in some way to coordinating and attempting to minimize excavations, but all may not be appropriate in every jurisdiction. The provisions of this Model may also, where authorized, be modified and adopted as local policies or regulations.

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WHEREAS, in other jurisdictions, the demand for access and the number of entities seeking to install Facilities has sometimes resulted in multiple, serial Excavations within the Rights of Way, which can and has resulted in traffic disruption, a weakening of pavement integrity, and a shortening of the useful life of paved surfaces; and

WHEREAS, while Colorado state statutes, particularly, C.R.S. 38-5.5-109, contains some procedures for addressing joint trenching in connection with broadband provider operations in the Rights of Way, at the present there is no comprehensive mechanism nor legal requirement that all public and commercial entities coordinate Excavation in the Rights of Way, and construct Facilities in newly developed areas to minimize future Excavations; and

WHEREAS, the [City/Town/County] of ______intends to responsibly manage its Rights of Way by anticipating such demand and planning accordingly.

NOW, THEREFORE, be it enacted by the City/Town/County of ______as follows:

I. PURPOSE AND OBJECTIVES

A. Purpose: to provide principles and procedures for the coordination of construction Excavation within any public Rights of Way, and to protect the integrity of the Rights of Way and road system.

B. Objectives. Public and private uses of Rights of Way for location of Facilities employed in the provision of public services should, in the interests of the general welfare, be accommodated; however, the City/Town/County must insure that the primary purpose of the Rights of Way, namely the safe and efficient passage of pedestrian and vehicular traffic, is maintained to the greatest extent possible. In addition, the value of other public and private installations, Facilities and properties should be protected, competing uses must be reconciled, and the public safety preserved. The use of the Rights of Way corridors for location of Facilities is secondary to these public objectives. This ordinance is intended to assist in striking a balance between the public need for efficient, safe transportation routes and the use of Rights of Way for location of Facilities by public and private entities. It thus has several objectives:

1. To insure that the public health, safety and welfare is maintained and that public inconvenience is minimized.

2. To facilitate work within the Rights of Way through the standardization of regulations.

3. To conserve and fairly apportion the limited physical capacity of the public Rights of Way held in public trust by the City/Town/County.

4. To promote cooperation among the Applicants and Permittees (as defined herein) and the City/Town/County in the occupation of the public Rights of Way, and work

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therein, in order to (i) eliminate duplication that is wasteful, unnecessary or unsightly, (ii) lower the Permittee’s and the City’s/Town’s/County’s costs of providing services to the public, and (iii) minimize Rights of Way Excavations.

II. DEFINITIONS

For the purpose of this Chapter the following words shall have the following meanings:

A. “Applicant” means an owner or duly authorized agent of such owner, who has submitted an application for a Permit to Excavate in the Rights of Way.

B. “City”/“Town”/“County” means the City/Town/County of ______, Colorado.

C. “Conduit” means a single enclosed raceway for cables, fiber optics or other wires, or a pipe or canal used to convey fluids or gases.

D. “Department” means the Department of Public Works.

E. “Developer” means the person, partnership, corporation, or other legal entity who is improving property within the City/Town/County and who is legally responsible to the City/Town/County for the construction of improvements within a subdivision or as a condition of a building permit or other land use or development authorization.

F. “Director” means the Director of Public Works of the City/Town/County or his/her authorized representative.

G. “Emergency” means any event which may threaten public health or safety, or that results in an interruption in the provision of services, including, but not limited to, damaged or leaking water or gas conduit systems, damaged, plugged, or leaking sewer or storm drain conduit systems, damaged electrical and communications facilities, and advanced notice of needed repairs is impracticable under the circumstances.

H. “Excavate” or “Excavation" means any Work in the surface or subsurface of the Rights of Way, including, but not limited to opening the Rights of Way; installing, servicing, repairing or modifying any Facility(ies) in or under the surface or subsurface of the Rights of Way, and restoring the surface and subsurface of the Rights of Way.

I. “Facilities” means, including, without limitation, any pipes, conduits, wires, cables, amplifiers, transformers, fiber optic lines, antennae, poles, ducts, fixtures and appurtenances and other like equipment used in connection with transmitting, receiving, distributing, offering, and providing broadband, utility and other services.

J. "Landscaping" means materials, including without limitation, grass, ground cover, shrubs, vines, hedges, or trees and non living natural materials commonly used in landscape development, as well as attendant irrigation systems.

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K. “Major Work” means any reasonably foreseeable Excavation that will affect the Rights of Way for more than five (5) consecutive calendar days.

L. “Owner” means any Person, including the City, who owns any Facilities that are or are proposed to be installed or maintained in the Rights of Way.

M. “Permit” means any authorization for use of the Rights of Way granted in accordance with the terms of this ordinance, and other applicable laws and policies of the City/Town/County.

N. “Permittee” means the holder of a valid Permit issued pursuant to this Chapter and other applicable provisions of applicable law for Excavation in the Rights of Way.

O. “Person” means any person, firm, partnership, special, metropolitan, or general district, association, corporation, company, or organization of any kind.

P. “Rights of Way” means any public street, road, way, place, alley, sidewalk or easement, that is owned, held or otherwise dedicated to the City/Town/County for public use.

Q. “Work” means any labor performed on, or any use or storage of equipment or materials, including but not limited to, construction of streets and all related appurtenances, fixtures, improvements, sidewalks, driveway openings, street lights, and traffic signal devices. It shall also mean construction, maintenance, and repair of all underground structures such as pipes, conduit, ducts, tunnels, manholes, vaults, buried cable, wire, or any other similar Facilities located below surface, and installation of overhead poles used for any purpose.

III. POLICE POWERS

A Permittee's rights hereunder are subject to the police powers of the City/Town/County, which include the power to adopt and enforce ordinances, including amendments to this ordinance, and regulations necessary to the safety, health, and welfare of the public. A Permittee shall comply with all applicable ordinances and regulations enacted, or hereafter enacted, by the City/Town/County or any other legally constituted governmental unit having lawful jurisdiction over the subject matter hereof. The City/Town/County reserves the right to exercise its police powers, notwithstanding anything in this ordinance or any Permit to the contrary. Any conflict between the provisions of the ordinance or a Permit and any other present or future lawful exercise of the City's/Town’s/County’s police powers shall be resolved in favor of the latter.

IV. JOINT PLANNING AND CONSTRUCTION; COORDINATION OF PLANNED EXCAVATIONS

A. Excavations in City/Town/County Rights of Way disrupt and interfere with the public use of those Rights of Ways and can damage the pavement and Landscaping. The purpose of this section is to reduce this disruption, interference and damage by promoting better coordination among Applicants and Permittees making excavations in City/Town/County Rights of Way and between these Persons and the City/Town/County. Better coordination will assist in minimizing the number of Excavations being

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October 14, 2015 SAN PABLO BROADBAND PLANNING made wherever feasible, and will ensure the Excavations in City/Town/County Rights of Way are, to the maximum extent possible, performed before, rather than after, the resurfacing of the Rights of Way by the City/Town/County.

B. Any Permittee owning, operating or installing facilities in City/Town/County Rights of Way, providing water, sewer, gas, electric, broadband, communication, video or other utility or utility- like services, shall meet annually with the Director, at the Director’s request to discuss Permittee’s excavation master plan. At such meeting, to the extent not already in possession of the City/Town/County, Permittee shall submit documentation, in a form required by the Director, showing a location of the Permittee’s existing Facilities in the City/Town/County Rights of Way. Permittee shall discuss with the Director, its excavation master plan, and identify planned Major Work in the City/Town/County. The Director may make his own record on a map, drawing or other documentation, of each Permittee’s planned Major Work in the City/Town/County; provided, however, that no such document prepared by the Director shall identify a particular entity, or the planned Major Work of that particular entity. An excavation master plan shall be submitted in both hard copy and digital format. As used in this subsection, the requirement to identify planned Major Work refers to any Major Work planned to occur more in the ensuing three (3) years after the date that the Permittee’s master plan or update is discussed. Between the annual meetings to discuss planned Major Work, a Permittee shall use its best efforts to inform the Director of any substantial changes in the planned Major Work discussed at the annual meeting.

C. The Director shall review the major excavation plan and identify conflicts and opportunities for coordination of Excavations. The Director shall notify affected Owners and Permittees of such conflicts and opportunities to the extent necessary to maximize coordination of Excavation. Each Applicant for a Permit shall coordinate, to the extent practicable, with each potentially affected Owner and Permittee to minimize disruption in the Rights of Way.

D. The City/Town/County may disclose information contained in a Permittee’s master excavation plan to any public or private entity planning on conducting Excavation activities in the Rights of Way only on a need-to-know basis in order to facilitate coordination among excavators and to avoid unnecessary Excavation in the Rights of Way. To the maximum extent permissible under the Colorado Open Records Act, as amended, the City/Town/County shall not otherwise disclose to the public any information contained in a master excavation plan submitted by a Permittee that is proprietary, trade secret or is otherwise protected from disclosure; provided, however that the City/Town/County shall have no duty to decline to disclose any information that the Permittee has not identified on its face as proprietary, trade secret or otherwise protected from disclosure. The City/Town/County shall notify a Permittee of any request for inspection of public records that calls for disclosure of any master excavation plan on which any information has been identified as proprietary, trade secret or otherwise protected from disclosure. The City/Town/County shall consult with its legal counsel regarding any such request and shall inform the affected Permittee either that the City/Town/County will refuse to disclose the protected information or, if there is no proper basis for such refusal, that the City/Town/County intends to disclose the requested information unless ordered otherwise by a court.

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E. The Director shall prepare a Repaving Plan showing the Rights of Way resurfacing planned by the City/Town/County. For purposes of this section, the Repaving Plan shall include a Landscaping or other Rights of Way improvement plan. The Repaving Plan shall be revised and updated on an annual basis. The Director shall make the City’s/Town’s/County’s Repaving Plan available for public inspection. In addition, after determining the City’s/Town’s/County’s Rights of Way resurfacing Work that is proposed for each year, the Director shall send a notice of the proposed Work to all Permittees that have had an annual meeting with the Director, and those broadband providers that are identified on the list maintained by the Colorado Department of Transportation pursuant to C.R.S. 39- 5.5-109 (1)(b).

F. Prior to applying for a Permit, any Person planning to Excavate in the City’s/Town’s/County’s Rights of Way shall review the City’s/Town’s/County’s Repaving Plan on file with the Director and shall coordinate, to the extent practicable, with the utility and street Work shown on such plans to minimize damage to, and avoid undue disruption and interference with the public use of the Rights of Way.

G. In performing location of Facilities in the Rights of Way in preparation for construction under a Permit, Permittee shall compile all information obtained regarding its or any other Facilities in the Rights of Way related to a particular Permit, and shall make that information available to the City/Town/County in a written and verified format acceptable to the Director. If the Permittee fails to provide the locate information requested by the City/Town/County, the City/Town/County may obtain this information and charge the Permittee the actual costs for obtaining the information.

V. JOINT EXCAVATION

A. Public Entity Excavators. Whenever two or more public entity excavators propose Major Work in the same block within a three-year period, such Work shall be performed by one public entity excavator. The participants to the excavation shall pay their pro rata share of the Work, or as otherwise agreed to by the affected public entities. For purposes of this subsection, the public entity excavators shall be treated as a single Permit Applicant and shall submit one application.

B. Private Entity Excavators. Whenever two or more private entity excavators propose Major Work in the same block within a three-year period, such Work shall be performed by one private entity excavator. For purposes of this subsection, the private entity excavators shall be treated as a single Permit applicant and shall submit one application.

C. Public Entity Excavator and Private Entity Excavator. Whenever a public entity excavator(s) and a private entity excavator(s) propose Major Work in the same block within a three-year period, the Department shall condition Permits for such Work in a manner that maximizes coordination and minimizes the total period of construction.

D. Excavations Not Identified on Major Excavation Plans. When an Applicant seeks a Permit for an Excavation, and such Excavation has not been identified on a major excavation plan so as

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October 14, 2015 SAN PABLO BROADBAND PLANNING to allow the City/Town/County to coordinate joint Excavation as set forth in subsections A through C of this section, an Applicant may, in the discretion of the Director, be required to circulate a description of its proposed Excavation to the Permittees and other parties described in Section IV.E above, to determine whether any Persons have requirements for installing Facilities along the proposed route.

1. The Persons notified should be provided with the Applicant’s proposed route plan, the target commencement date and the estimated completion date.

2. Within ten (10) working days after the notification required by this subsection, any interested Person must notify the Applicant of their requirements so that the Applicant may incorporate these requirements, where reasonable, in its Permit application. The Applicant should summarize the responses it receives from other Persons in its Application.

3. If the Applicant believes that it is not reasonably feasible to entertain the

requests made by another Person(s) for conditions of joint Excavation, it should notify City/Town/County and the other Person(s) within ten (10) working days from the date of receiving the requirements from the other Person(s) and provide reasons why it is considered not reasonable to do so. The parties are expected to endeavor to resolve any technical or commercial concerns among themselves, and the Applicant shall report the results of these efforts together with its application for a Permit.

E. Waiver of Joint Excavation Requirements. Permit Applicants may seek a waiver of the joint Excavation requirements with respect to a particular Excavation.

1. Except in cases of Emergencies, within thirty (30) calendar days of receipt of a written request for a waiver, the Director, in his or her discretion, may grant a waiver to the joint Excavation requirements for good cause. In making his or her decision on the request for waiver, the Director shall consider the impact of the proposed Excavation on the neighborhood, the applicant's need to provide services to a property or area, facilitating the deployment of new technology and improved services, and the public health, safety, welfare, and convenience. The Director shall indicate in written, electronic, or facsimile communication the basis for granting any waiver pursuant to this subsection.

2. The Director may waive the requirements for joint Excavation in cases where Emergency conditions exist.

3. The Director may place additional conditions on any Permit(s) subject to a waiver, including, without limitation, the charging of additional fees. The Director's decision regarding waivers of the joint Excavation requirements shall be final.

VI. CONSTRUCTION OF NEW STREETS

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A. Intent. The intent of this section is to provide for the construction of infrastructure sufficient to allow broadband communications entities desiring to deploy Facilities in the future to do so by pulling the same through the conduit and appurtenances installed pursuant to this section and without Excavating within the Rights of Way. This section is not intended to require Owners of broadband Facilities to install additional ducts or conduit in existing Rights of Way; rather, it is intended to require those constructing public streets, including the City/Town/County and Developers, to provide and install such conduit and appurtenances as may be necessary to accommodate future broadband needs within the Rights of Way without further Excavation.

B. Requirements—Adoption of Standards. Whenever any new public street is constructed, whether by the City/Town/County as a public works project or by a Developer or other private party in conjunction with development, the following shall be required:

1. In all new local streets serving or abutting residential development, a minimum of two 2” conduit with pull box every 1000’ feet or less (and at every 90 degree turn) shall be installed by the party constructing the street.

2. In all new collector or arterial streets serving or abutting residential development, and in all new streets serving or abutting nonresidential development, a minimum of four 2” conduit with pull box every 1000’ feet or less (and at every 90 degree turn) shall be installed by the party constructing the street; provided however that at the discretion of the Director, the number and size of the conduit and spacing of pull box may be modified to address the reasonably known plans and/or demand for broadband capacity in these locations.

3. In addition to installing conduit, the party constructing the street will be required to install such vaults and other appurtenances as may be necessary to accommodate installation and connection of broadband Facilities within the conduit.

4. All construction and installation shall be accomplished according to construction standards adopted by the City/Town/County. The construction standards shall be adopted with due consideration given to existing and anticipated technologies and consistent with industry standards.

5. All Facilities installed by Developers or other private parties pursuant to this section shall be conveyed and dedicated to the City/Town/County with the dedication and conveyance of the public street and/or Rights of Way.

6. All installation costs shall be the responsibility of the party constructing the public street.

C. Use by Broadband Service Providers and Network Owners. Whenever conduit installed or to be installed under this section is available or will become available within a newly constructed public streets or Rights of Way upon dedication, all broadband service providers or network owners thereafter locating Facilities within such street or Rights of Way shall be required to locate their

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October 14, 2015 SAN PABLO BROADBAND PLANNING communications lines within such conduit unless it can be demonstrated to the reasonable satisfaction of the City/Town/County that such location is not technologically feasible or reasonably practicable. Conduit capacity shall be allocated to broadband service providers or network owners on a first-come, first-served basis; provided, that the City/Town/County may reserve capacity within such conduits for its own use; and provided further, that the Director may adopt additional rules for conduit allocation in order to ensure that all broadband service providers and network owners have reasonable access to the Rights of Way and that no barriers to entry or competition result from the allocation of conduit space.

D. Fees. The City/Town/County reserves the right to charge reasonable fees for the use of conduit installed pursuant to this section, to the extent consistent with and as limited by federal and state laws. Any such fees shall be established by resolution or ordinance.

This Ordinance shall take effect immediately upon [insert language appropriate for individual jurisdictions …]

INTRODUCED, READ, ADOPTED ON FIRST READING AND ORDERED PUBLISHED, as provided by law, by the City Council/Town Board of Trustees/Board of County Commissioners of the City/Town/County of ______, at its regular meeting held on the __ day of ______, 201_.

______

Name and Title

ATTEST:

______

City/Town/County Clerk

READ, ADOPTED ON SECOND READING AND APPROVED this __ day of ______, 201_.

______

Name and Title

ATTEST:

______

City/Town/County Clerk

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6.3 Limited Deployment/High-Value Target Model – San Pablo Case Study Santa Monica, California has pursued a high-value target program for years. Masha Zager wrote the following for Broadband Communities:39

An old joke asks, “How do you eat an elephant?” The answer, of course, is “One bite at a time.” Many daunting projects become feasible once they are broken into bite-size pieces. The trick is to make sure that each step along the way produces tangible benefits and that those benefits are applied to the next step in the process.

This is how the city of Santa Monica, Calif., built City Net, its 10 Gbps fiber optic network. Bite by bite, over more than a decade, Santa Monica developed an asset that now provides cost savings and revenue for the city and other public agencies, offers cost savings and competitive advantages to local businesses, and serves as a powerful economic development tool.

Step 1: Planning

City Net had its origins in the Telecommunications Act of 1996, which held out the promise of telecom competition. Jory Wolf, who was then Santa Monica’s information systems manager and is now the CIO, looked forward to the prospect of reducing the city’s data access costs. After the act became law, he began a series of discussions with Internet service providers about offering competitive broadband services.

When these companies proved unable to offer affordable data services, the city quickly set up a task force to address the use of public assets for telecommunications, the coordination of city telecom systems and universal access to broadband. The plan was unusually ambitious, encompassing video, data, voice, cable, wireless and other services, including two-way video communications. The needs of public-safety agencies, of such municipal facilities as parks and libraries, and of the Unified Santa Monica–Malibu School District and Santa Monica College were all taken into consideration.

With help from a consultant and a community advisory group, Santa Monica’s City Telecommunications Working Group assessed existing infrastructure and needs, evaluated possible solutions and prepared financial models for several different approaches. In 1998, it issued a telecommunications master plan, which called for an institutional fiber network.

Step 2: Leasing an Institutional Network

When Santa Monica next renewed the franchise of the local cable TV operator, it also agreed to lease from that operator an institutional fiber network that connected 43 city

39 Zanger, Masha (May 2011). “Santa Monica City Net: How to Grow a Network.” Broadband Communities. http://www.bbpmag.com/2011mags/mayjune11/BBC_MayJun11_SantaMonica.pdf.

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buildings, along with school and college facilities. The city funded the $530,000 in construction costs and shared the operations and maintenance costs with the school district and college.

The leased institutional network went live in 2002 and immediately yielded operational cost savings. By operating the network instead of purchasing bandwidth, the city, school district and college reduced their combined telecom costs to $700,000 from $1.1 million. Within a few years, the annual savings grew to $500,000.

Step 3: Building an Institutional Network

The city used these savings to build its own 10 Gbps municipal fiber optic network, using Metro Ethernet equipment from MRV. The network made possible a variety of new, high-bandwidth municipal applications, including traffic surveillance, traffic signal synchronization, real-time parking advisories, real-time mass transit signs and security cameras.

In addition, the city upgraded its own Internet connection to 1 Gbps and installed a 10 Gbps connection to an offsite data center.

Although the original leased network was reserved for municipal use, the city-owned network had no such restrictions. The city was now free to lease excess fiber to private organizations.

By this time, the residential sector was reasonably well served by the incumbent cable operator, and, as a result of the city’s encouragement, Verizon was also building out its FiOS network in Santa Monica. (Today, FiOS service is available to about two-thirds of residences.) [Of course, neither the incumbent cable operator nor Verizon operate an open access infrastructure.]

However, the city’s business community still had no affordable ultra-high-speed access. Bandwidth of 100 Mbps cost about $3,500 per month, and the city was concerned about making business broadband more affordable. Wolf says, “We wanted to create the concept of a ‘tech coast,’ so we had to do something to address the cost of broadband.”

Step 4: Leasing Dark Fiber to Businesses

In 2006, the city began leasing its excess dark fiber to local businesses. Because the monthly fees were low, businesses that needed the dark fiber were willing to fund the cost of building fiber from the backbone to their buildings, thus extending the network at no cost to the city.

The city was able to attract a dozen customers to its dark-fiber offering through word of mouth alone. These customers – mainly businesses with 2,000 or more employees –

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needed point-to-point connections between multiple offices in Santa Monica. To connect outside the city, they partnered with third-party providers to get them to the nearest Internet point of presence.

However, the dark-fiber offering was less attractive to smaller and mid-sized businesses. At the end of 2008, the city surveyed more than 3,000 businesses located within 200 feet of the backbone to find out whether they could also benefit from access to city fiber. The responses indicated that Santa Monica’s businesses were not well served by private telecom companies. The great majority of survey respondents either could not afford or did not have access to the amount of bandwidth they required. Of the few that had adequate bandwidth, most were unhappy with the quality of service they received.

Despite their unmet needs, these businesses did not avail themselves of the city’s dark fiber offer both because 10 Gbps service was more than they needed and because connecting to the local Internet point of presence on their own was expensive. Most of them were looking for ready-made Internet connectivity at speeds between 100 Mbps to 1 Gbps, and they requested that the city provide such service.

Step 5: Providing Internet Bandwidth

In 2009, the city decided to make an additional investment to accommodate these businesses. “We looked at lit services to provide an affordable way to multiplex broadband into the community, hook up with ISPs and get wholesale rates,” Wolf explains.

To be able to provide Internet access to businesses, the city leased a fiber connection from City Net to One Wilshire, a major colocation center in Los Angeles in which about 270 Internet providers interconnect their networks. Obtaining Internet access at a major carrier hotel such as One Wilshire is much less expensive than connecting at a local point of presence.

However, leasing the 15-mile line to Los Angeles proved to be a challenge. Service providers were initially reluctant to provide transport, knowing that the city planned to make services available to local businesses – they believed they would effectively cannibalize their own commercial offerings in Santa Monica. After extensive negotiations, one company agreed to provide transport.

Step 6: Marketing Internet Services

With all these pieces in place, the city was able to begin offering Internet access to local businesses. Rather than continuing to rely only on word of mouth, it began advertising on the sides of buses, getting the word out through the Chamber of Commerce, talking with real estate brokerage companies and property management companies, and even using social networking sites such as Twitter and Facebook.

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To make broadband more affordable, the city decided to keep its offerings simple – 100 Mbps, 1 Gbps or 10 Gbps, with standardized contract terms – and it dispensed with service-level agreements, counting on the inherent reliability of fiber to provide sufficient uptime. At first, the city advised customers to secure separate, secondary paths, but City Net now has enough redundant connections of its own that this is no longer necessary. (In the last several years, a number of other fiber network operators have also begun to sell business services without service-level agreements, on the grounds that a well- designed and well-run fiber network provides enough reliability for most businesses.) [Alternatively, service-level agreements can function as a revenue generating add-on product.]

Figure 39: Santa Monica City Net

Today, most large commercial parks and multitenant commercial buildings in Santa Monica are connected to the network. [The city’s web site lists 19 on-net commercial buildings . Based on the size of the network build as depicted in “Figure 39: Santa Monica City Net” and a review of Google Earth of Santa Monica, 19 commercial

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buildings is not “most”]. Thanks to low Internet connection costs and simple contracts, business customers of City Net typically obtain 10 times the broadband speed for about the same price they once paid for non-fiber services. The 100 Mbps connection that once cost $3,500 per month now costs about $500 per month. A measure of City Net’s success is that it has had 100% customer retention.

Though the city provides Internet access directly, it also makes the network available to third-party providers on an open-access basis. “The incumbents have chosen not to use our assets,” Wolf says, explaining that larger providers are often reluctant to operate over networks where they cannot control the user experience and that their marketing and support organizations are not geared to using other companies’ networks.

However, other ISPs have shown interest in the network now that it is becoming successful. Currently, two ISPs offer services generally over the network, and other ISPs serve the Santa Monica offices of businesses that they deal with in other locations. Wolf says, “We have the opportunity to handle the business any way they prefer. … We’re not an obstacle; we’re an enabler. We don’t see ourselves as competitors, but as filling a void.”

City Net’s revenue from current business customers totals about $300,000 per year, enough to fund network operations and maintenance and to support an extensive system of free Wi-Fi hot spots throughout the city. Wi-Fi is now available at parks, beaches, libraries, public buildings and other open-space areas. On any given day, about 2,000 of Santa Monica’s 87,000 residents use the 27 Wi-Fi hot spots.

The city also has $190,000 of its capital funds remaining, which it uses as a revolving capital improvement project account. This account funds construction for network expansion, which is repaid by customers as the network is extended to their premises.

An indirect benefit of City Net is that it has forced competing networks to lower their prices. Wolf’s office estimates that nonparticipating providers have lowered their bandwidth prices by 20% or more, making bandwidth generally more affordable throughout the city. “If that’s all we had accomplished, we’d feel that we’d done what we intended,” Wolf says.

Step 7: Expanding the Network

City Net’s footprint today is still only about 60% of its planned total. Wolf says, “We’re continually expanding, running fiber all through the downtown area, and lighting up the major transit corridors and commercial corridors – every commercial corridor will have fiber. We’ll have Phase 5 completed in about 10 months.”

Not only do businesses pay for the fiber network to be extended and connected to their premises – which is unusual enough in the United States – but they also return these

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network additions to the city. Typically, a business can recoup the up-front fee in the form of lower monthly telecom costs within two to three years.

Potential business customers aren’t the only entities that request City Net connections; property managers and brokers also pay to connect their buildings to the network because these connections help them market their properties. Once a commercial building is on the network, whoever paid for the connection – whether tenant or owner – can negotiate with other potential customers in the building to share the access.

Wolf explains, “I believe strongly that businesses want to know what it’s going to cost them. This way they know, and they understand the differentiation between total and ongoing bandwidth costs. … It makes it more cost-effective to continue to expand to other customers.”

The downside of requiring customers to pay for their own connections is that some potential customers cannot afford the up-front fee. The network would certainly grow more quickly if the city paid for the connections. In addition, some residential neighborhoods that do not have fiber access would like to connect to City Net – but again, most residents cannot pay for their own connections. Santa Monica applied for a broadband stimulus grant to enable it to pay for network expansions but did not receive it, so the policy of expanding the network based on demand will remain for the foreseeable future.

Economic Development

Making broadband access affordable is beginning to pay off in terms of economic development, as the city had hoped. As an upscale beach city, Santa Monica is an inherently desirable location, but high rents deter some businesses from operating there. By offsetting the high rents, low broadband costs make it possible for more businesses to locate in the city. [It’s nice to say, but is there any evidence it is happening?]

In addition, existing businesses have found ways to compete more effectively. For example, the Fairmont Hotel Santa Monica, a historic luxury hotel on the ocean, now offers 100 Mbps broadband to guests and has repositioned itself as a tech-friendly hotel suitable for technology conventions and media production. Directors of films that are shooting in Los Angeles can stay at the Fairmont, receive daily footage via the Internet at the end of each day, review the footage and then forward approved sequences to studios and postproduction companies – a far more efficient procedure than the standard method of copying dailies to hard drives and sending the hard drives by courier to studios and by leased private jet to postproduction facilities.

A similar service is provided by Sohonet, an international private network operator that offers connectivity to film producers on an as-needed, project basis. Sohonet uses dark

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fiber on Santa Monica City Net to connect postproduction facilities in Santa Monica with studios and film locations worldwide.

The UCLA Santa Monica Medical Center has implemented a telemedicine initiative that involved hiring 180 software developers in Santa Monica. The medical center not only connects its main site to its data facility and satellite clinics, but also works with U.S. military services to offer telemedicine and virtual surgical procedures to troops stationed abroad. The medical center has also become 100% paperless for employee records, billing information and medical imaging, and it provides high-speed access to patients and their families in hospital rooms.

How Many Santa Monicas?

Santa Monica’s City Net has received recognition in the local and national press and garnered prestigious awards from the Public Technology Institute and Harvard’s Kennedy School of Government. Its success inspired the nearby cities of Burbank and Long Beach to launch similar projects, and the three cities are now considering developing a regional network to enable high-speed data exchange throughout the West Los Angeles region. The regional network would be used first by the city governments for collaborative IT projects and public-safety communications. Later, it would be made available to businesses to facilitate regional communications among their offices and with their customers and suppliers.

Santa Monica has also consulted with other cities that are interested in learning from its experiences. Wolf believes the model is replicable in many other cities but not everywhere. Santa Monica’s business model is most likely to succeed in cities whose municipal buildings are located reasonably close to one another and that are within about 50 miles of global data centers with access to competitive broadband options.

In places where the model works, Wolf says, city governments should study it as an economic development strategy. “Businesses are community stakeholders,” he points out. With a system such as City Net, “the community wins, residents win and businesses win.”

Santa Monica’s example provides some valuable lessons for communities pursuing high value target strategies:

 It is very important to set aside the funds saved or excess revenues generated for future growth.  It is critical to have an overarching plan from the beginning. As new opportunities arise, incremental telecommunications improvements that contribute to the overarching plan can be implemented.

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 A study without a plan is of little use. Santa Monica didn’t just study the opportunity to expand broadband in the community, they took the study and created a plan and then took the courageous first steps.  High value target programs will not evolve into ubiquitous builds unless that is the plan from the beginning. Even then, high value target projects must pass through significant decision points that may delay or cancel ubiquitous build plans.

Because of the limited scope of high-value target programs, it is very hard to capitalize upon network effects and economies-of-scale. Furthermore, a limited deployment pursuing only high value targets does not address equity and limits business development opportunities.

We recommend San Pablo implement distribution rings that can function as a limited deployment/high- value target solution. Pursuing this model allows the City the flexibility of an additional decision gate in between completion of the distribution rings (or the limited deployment/high-value target network) and the full deployment.

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6.4 Publicly Owned and Operated Model – Bristol Virginia Utilities Case Study Some communities have elected to deploy fiber to the premises and to function as a sole provider on that new infrastructure. One of the leading publicly owned and operated fiber to the premises projects is the Bristol Virginia Utilities OptiNet. In 2008 BVU OptiNet produced the following report for the Virginia Resources Authority:40

Bristol Virginia Community Profile

The city of Bristol Virginia, located in rural Southwest Virginia, is part of the Metropolitan Statistical Area known as the Tri-Cities. Divided down its main street by the Virginia-Tennessee state line, the city is known worldwide by sports fans as the home to Bristol Motor Speedway (the “World’s Fastest Half-Mile”) and to music fans as the “Birthplace of Country Music.”

Bristol Virginia has a population of about 17,500 residents and rests in the central Appalachian Mountains, which are often credited with isolating residents from the rest of the Commonwealth of Virginia. The area in and around Bristol is a rural agricultural and coal-based economy.

According to statistical data collected for 2007, the unemployment rate in Bristol, Va., is 5.30%, with job growth at 1.32%. However, job growth over the next 10 years is predicted to be 20.80%. The city’s income per capita is $20,098, which includes all adults and children. Median household income is $33,750, and median home cost is $171,900.

With Southwest Virginia battling major declines in its two staple products of tobacco and coal at the close of the 20th century, local leaders feared that serious economic decline was looming. They also watched in vain as local youth departed the region in search of more lucrative and diverse job opportunities. This led Bristol Virginia’s leadership, in conjunction with its 64-year-old electric utility, to make a daring decision in 2001 – to enhance the city’s economic development clout by investing in advanced fiber-optic telecommunications.

Overview of Broadband Project

Bristol Virginia operates the first government-owned public utility – Bristol Virginia Utilities or BVU – in the nation to deploy a fiber-to-the-user (FTTU) network that offers the triple play of services (digital phone, video and data). The utility invested millions of dollars in its network, called OptiNet, based on the realization that only a fiber network would be capable of meeting future bandwidth demands of businesses and consumers.

40 BVU OptiNet (14 August 2008). “FTTU Broadband Network Currently Offered in Bristol Virginia and Neighboring Southwest Virginia Counties through BVU OptiNet.”

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BVU operates as the government enterprise fund for the city of Bristol Virginia, providing electric, water, wastewater and fiber-optic telecommunications and information services to residents. The utility is governed by a seven-member BVU Board, appointed by Bristol Virginia City Council, and has revenues of about $77 million a year.

BVU has an immediate service area of 125 square miles, comprising the city of Bristol Virginia and portions of Washington County, Va.; Scott County, Va.; and Sullivan County, Tenn.

Due to partnerships established with two economic development commissions in Southwest Virginia, BVU OptiNet’s FTTU service area has been expanded to include Smyth, Tazewell, Russell, Buchanan, Dickenson and Wythe Counties. As of August 2008, the network consists of 350 miles of fiber backbone and 450 miles of fiber access infrastructure. The architecture is both BPON and GPON and has 15 Points of Presence (POPS).

In 2007, BVU OptiNet created a new business unit called BVU FOCUS that provides advanced telecommunications consulting, operations and management services to municipal entities globally. FOCUS stands for Finding Opportunities for Communities Throughout the United States. BVU FOCUS currently has two customers: CPC (Cumberland Plateau Company) OptiNet, which provides digital phone and data services to business customers in Dickenson, Tazewell, Buchanan, and Russell Counties in Virginia; and MI-Connection, which provides cable and broadband services for the towns of Davidson, Mooresville and Cornelius in North Carolina.

History of BVU OptiNet

In 1999, the BVU Board and Bristol Virginia City Council approved construction on 17 miles of fiber-optic cable for updating communications capabilities between the utility’s eight electric substations. Later that year, the council voted to invest additional funds to construct fiber loops to connect all city offices, including city hall, public school facilities, the library, and the police, fire and sheriff’s departments.

Initially, the plan was to launch the internal data center and partner later with another carrier or agent to provide advanced broadband to residents. However, no such agent was willing to make the monetary investment to achieve such a high level of digital technology.

By 2000, BVU was providing broadband data and telephone to local public schools and government offices. As businesses learned of the utility’s advanced broadband capabilities, they also expressed interest in plugging into the network. It became clear that investing in a fiber-to-the-user (FTTU) network to provide service to all residences and businesses would greatly enhance economic development possibilities.

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As the BVU Board minutes indicate in a January 22, 2001, meeting, the board voted on a “Policy Statement On Fiber Optic System” and approved Atlantic Engineering Group (Braselton, Ga.) to conduct an engineering study to determine the cost of providing fiber- optic service to every home and business within BVU’s service area.

The board also voted to have Spaduzzi & Associates conduct a consumer survey related to the offering of telecommunications services in its immediate service area. During 2001, two survey studies were eventually completed. The first was a blind survey designed to gauge the level of local market interest in competitive telecom products and services. Later, a second survey was completed that specifically stated BVU was interested in providing competitive telecom products. This survey asked consumers to answer questions directly related to incumbent operators. Survey results indicated that 97% of respondents felt BVU’s service was satisfactory, that 70% of respondents would be interested in switching their cable and telephone service from the incumbent operator to BVU, and that more than 50% were willing to switch their Internet service.

Two business plans were then developed, one by CCG Consulting Inc. and a second by Atlantic Engineering Group. Both plans indicated that success was possible if BVU’s telecom services could achieve a 30% to 35% market penetration in the utility’s immediate service area. Encouraged by the data, the BVU Board, with approval from Bristol Virginia City Council, resolved to move forward.

As outlined in the previously mentioned “Policy Statement On Fiber Optic System,” BVU’s telecommunications and information system, later to be called OptiNet, had a dual mission: 1) to enhance economic development opportunities in Bristol, Va., and surrounding areas by providing access to cutting-edge services and future-proof technology; and 2) to improve the quality of life for local citizens and small businesses by offering broadband access at affordable and stable prices.

Measurable Results: BVU’s investment in OptiNet has been extremely successful. The division’s net revenues have risen from $302,746 in 2002 to $16 million for budget fiscal year 2009, making OptiNet self-sufficient – with a $3 million capital budget of its own. The success of the investment is quantified by the system’s sharp rise in broadband service market penetration since 2003. The division now captures more than 62% of the possible residential and business sectors in its immediate service area, having gone from zero customers in 2002 to supporting 9,134 subscribers in 2008.

Build-Out of BVU OptiNet into Neighboring Counties

With the city’s expertise in FTTU broadband implementation and delivery, Bristol Virginia Utilities (BVU) was selected to enter into important partnerships to bring ubiquitous broadband access to isolated locations in Southwest Virginia. Working with the Virginia Coalfield Coalition, a non-profit organization comprised of the LENOWISCO and

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Cumberland Plateau Planning District Commissions, BVU was responsible for overseeing construction and deployment of high-capacity optical fiber along 160 miles in Buchanan, Dickenson, Lee, Russell, Tazewell and Wise Counties in Southwest Virginia.

In 2003, BVU and the Cumberland Plateau Planning District Commission (representing four of the neighboring counties) collaborated to construct the first 45 miles of the infrastructure that would run between Bristol and Richlands, Va., through the town of Lebanon in Russell County. Funding for this endeavor came from the U.S. Department of Commerce’s Economic Development Administration – a $1.6 million grant – and the Virginia Tobacco Indemnification and Community Revitalization Commission, which provided matching funds of $1.55 million. It was the promise of acquiring this advanced infrastructure that led two of the nation’s largest knowledge-based companies, CGI Inc. and Northrop Grumman Corporation, to construct multi-million dollar facilities in the Russell (County) Regional Business Technology Park during 2007. Northrop Grumman’s 101,000-square-foot data center – called the Southwest Enterprise Solutions Center – not only houses the company’s own internal IT operations but also the state’s Virginia Information Technologies Agency (VITA). The opening of the center is part of a landmark public-private infrastructure partnership between the Commonwealth of Virginia and Northrop Grumman to modernize the IT infrastructure for state government.

In late 2005, the U.S. Department of Commerce’s Economic Development Administration (EDA), acting through the Virginia Coalfield Coalition, presented a second $3 million grant to the Cumberland Plateau Planning District Commission. And once again, the Virginia Tobacco Indemnification and Community Revitalization Commission matched the amount, which provided BVU and the Cumberland Plateau Commission with a total of $6 million. This time, the funds were used to extend BVU’s fiber-optic cable an additional 155 miles into Southwest Virginia through the counties of Russell, Tazewell, Buchanan and Dickenson. Engineering for the 155-mile expansion commenced in early 2006 and actual construction began in February 2007 and continued for eight months. The majority of the fiber-optic infrastructure was located in the rights-of-way of the highway system in Southwest Virginia.

Measurable Results: Because of the broadband expertise of BVU and the partnerships that developed, businesses in these remote, rural locations of southern Appalachia now have access to some of the most sophisticated telecommunications technology in the world. With the expansion, Bristol Virginia Utilities and the Cumberland Plateau Company, now working together, have the capacity to serve more than 1,800 potential commercial and industrial customers in the four counties, including current and future businesses located in nine industrial parks. In addition to the new presence of both CGI Inc. and Northrop Grumman in Russell County, two new industrial parks are under construction in Buchanan and Tazewell counties – the Poplar Gap and Bluestone projects respectively – which will be serviced by Cumberland Plateau Company (CPC) OptiNet.

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Recent news reports confirm (Appendix VIII) that the related business growth has already resulted in “1,220 jobs across seven coal-producing counties, with more than $50 million in new private investment and $37 million in annual payrolls.” In addition, the information technology jobs in CGI’s software-development center and Northrop Grumman’s data center are paying an average weekly wage of about $960, a two-thirds increase over the normal average weekly wage in this region of $577.

Also, since the 155-mile expansion was completed (November 2007), approximately 250 businesses have become CPC OptiNet customers, resulting in $750,000 in additional revenues. By the end of 2010, the utility expects to have acquired another 500 customers in these locales – for a total of 750 customers and expected gross revenues of $2.5 million per year. This calculation is based on a conservative average “business billing” of $350 per month.

Consumer Savings Due to BVU OptiNet

It is important to note that BVU OptiNet’s rates have been extremely stable since deployment. For example, the OptiNet rate for expanded basic cable has not changed since July 2004. Residents and businesses are also paying less for the telecom services when OptiNet rates are compared to those of competitors. In a recent rates study involving BVU’s immediate service area, it was found that from 2006 through 2008, customers had saved a minimum of more than $9,750,000 on cable, phone and data services by using OptiNet. For example, an individual BVU OptiNet customer in Bristol, Va., in 2006 saved $10.18 per month or $122.16 a year on expanded basic cable service compared to the incumbent’s cable price and $15.63 per month or $187.56 annually for Internet service compared to the incumbent provider.

Chattanooga, Tennessee and Lafayette, Louisiana among others have followed BVU’s lead and now offer fairly successful utility department owned and operated fiber to the premises networks.

Not all municipal projects are self-sustaining. Burlington Telecom is a municipal telecommunications department providing residents of Burlington, Vermont with triple play services over a city-wide fiber network. Conceived in the 1980’s, there were a number of attempts to start the project through the 1990’s but a funding source could not be found. Finally, in the early 2000’s the project got started and the first stage was completed in 2003. The first stage was successful and local government officials believed the project would result in a major future public funding source. Unfortunately, in September of 2009 the City informed the Vermont Public Service Board that it had used $17 million in city money to support Burlington Telecom operations over the previous year.

In addition to the other difficulties they face, municipally owned and operated networks, while potentially extending true broadband to their residents, do little to offer true choice.

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6.5 Open Access Fiber to the premises Lessons Learned – UTOPIA Case Study The largest open access fiber to the premises project in the nation is the Utah Telecommunication Open Access, or UTOPIA, network. UTOPIA is a consortium of 16 Utah cities, created to provide construction and operation for a wholesale fiber optic telecommunications infrastructure. Eleven of the cities (Brigham City, Centerville, Layton, Lindon, Midvale, Murray, Orem, Payson, Perry, Tremonton, West Valley) have pledged sales tax revenue to support the bond payments and have some network construction completed. Five cities (Cedar City, Cedar Hills, Riverton, Vineyard, and Washington) are non-pledging and have no network construction complete.

UTOPIA was started in 2004 and has struggled since. When the project was conceived, the intent was to pass 141,000 addresses in three years and to secure over 49,000 subscribers across those addresses. At its three-year anniversary, UTOPIA had only completed 26% of its target construction and captured only 12.5% of its target subscribers. Even as late as 2012, UTOPIA had only achieved 41% of its construction goal for 2007 and only 19% of subscribers targeted for 2007.

2003 Goal for Actual Sep. 2007 June 2007 June 2009 June 2011 June 2013 Addresses Passed 141,000 37,160 48,646 56,000 65,000 Subscribers 49,350 6,161 8,009 8,572 11,120 Subscription Rate 35% 16.6% 16.5% 15.3% 17.1% Table 28: UTOPIA Goals and Results

More to the point, UTOPIA has failed to meet its financial goals. “Figure 40: UTOPIA Revenues and Expenses” demonstrates revenues have not kept pace with operating expenses and that debt service has been a continuing burden.

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0 2003 2004 2005 2006 2007 2008 2009 2010 2011

Operating Expense Debt Service Revenue UIA Payment

Figure 40: UTOPIA Revenues and Expenses

UTOPIA has had to continue to borrow from its member cities and through its bonding capacity in order to sustain operations and service its debt. As of the end of UTOPIA’s 2012 fiscal year (June 2013) UTOPIA had a negative net asset value of $146,528,97041.

UTOPIA’s sister project, iProvo (in Provo, Utah) also struggled. Maryland State Senator Catherine Pugh recently wrote in the Baltimore Sun opinion section42, “Taxpayers in Provo, Utah, for instance, spent $40 million to build a relatively small and modest network only to sell it for $1 a few years later because they underestimated the massive costs of operating, upgrading and maintaining it. …[A]s Provo residents learned, even their recently build network – barely a decade old – requires $20 million in upgrades before its new owner – Google – deems it fully operational.”

41 Represents combined “Total Net Position, End of Year” from UTOPIA and UIA Financial Statements from June 2013. 42 Pugh, Catherine (15 August 2013). “The False Promise of Municipal Broadband: Local Governments Keep Building Expensive Networks that Fail to Attract Customers.” The Baltimore Sun. http://www.baltimoresun.com/news/opinion/oped/bs-ed-broadband-20130815,0,2185759.story.

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From the experiences of UTOPIA and iProvo, we have identified many factors critical to the success of open access fiber to the premises. In the following, we will discuss four of them: scope, execution, financial planning, and network design.

6.5.1 Relevant Factors Experience with multiple municipal projects has demonstrated scope, market execution, financial planning, and network design represent relevant factors at the fulcrum of project success. Of course these are not the only factors that determine the success or failure of the municipal network project. They do, however, represent critical factors. It should also be understood that scope, market execution, financial planning, and network design are inextricably tied together. Nonetheless, we will do our best to address each of them in turn.

6.5.1.1 Scope The size, or scope, of a municipal open access fiber to the premises network makes a difference. Scope defines economy of scale opportunities and enables or restricts network effects.

6.5.1.1.1 Economies of Scale There are certain fixed costs when deploying a network of any size. Minimum staff is required to support the network, a head-end must be provided for video services, a network operations center (NOC) must be built, and so on. Most of these core functions require significant initial capital investment and very little incremental investment as new subscribers or addresses passed are added. The greater the scope of the project, the more efficiently it capitalizes on economies of scale.

Both UTOPIA and iProvo have significant excess capacity in their network core and their NOC. At various times, UTOPIA has made arrangements to use the iProvo head-end. The fact that the UTOPIA project could add its demand to the iProvo head-end and the capacity exists to absorb it suggest significant excess capacity.

In order to achieve economy of scale discounts on set top boxes, UTOPIA purchased a very large number of them. When construction failed to pass goal numbers of addresses and take rates were lower than anticipated, UTOPIA was left with significant stock of set top boxes the project could not use and eventually sold them at a significant loss.

Lessons Learned from UTOPIA and iProvo

Economies of scale are important to maximize fixed cost capital investments and to achieve bulk discounts on equipment and other materials. Nonetheless, it is important to carefully plan and coordinate needs so as not to over purchase to secure bulk purchase discounts.

6.5.1.1.2 Network Effects A product displays positive network effects when more usage of the product by any user increases the product’s value for other users. Real study of network effects did not begin until the early 1970s. However, in AT&T’s 1908 annual report, Theodore Vail, after describing the economies of scale,

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SAN PABLO BROADBAND PLANNING October 14, 2015 innovation, and legal benefits of the Bell System’s integrated vertical cooperation with its affiliated companies, explains43 :

There is now a decided tendency on the part of the public to favor consolidation wherever there are two exchanges. A great difficulty in the way is that, as a rule, much of the duplication of plant cannot be utilized for many years, if ever.

Gradually the public is becoming convinced that – quoting from last year’s report –

’Two exchange systems in the same community, each serving the same members, cannot be conceived of as a permanency, nor can the service in either be furnished at any material reduction because of the competition, if return on investment and proper maintenance are taken into account. Duplication of plant is a waste to the investor. Duplication of charges is a waste to the user.’ (pp. 20-21)

He then writes:

A telephone – without a connection at the other end of the line – is not even a toy or a scientific instrument. It is one of the most useless things in the world. Its value depends on the connection with the other telephone – and increases with the number of connections.

The Bell system under an intelligent control and broad policy has developed until it has assimilated itself into and in fact become the nervous system of the business and social organization of the country.

…

Cheapness is relative to value, not to price. Value in telephone service depends on development, extent of system, certainty and promptness. (pp. 21-23)

To paraphrase Vail, a gigabit network connection without a gigabit on the other end of the line (and throughout the line) is one of the most useless things in the world. That is, if the only places a network user wants to go focus their attention on only require 5 Mbps download speeds, the user doesn’t need more than 5 Mbps.

It is no exaggeration to say that the Internet has changed the way many Americans work, communicate, and live their lives. E-mail alone would bear that same distinction, and “Google” has become a verb because of its ubiquitous place in the lives of many Internet users. Well-known examples of other game-changing Internet offerings run the gamut of experience:

43 Vail, Theodore (1909). “Annual Report of the Directors of American Telephone & Telegraph Company to the Stockholders for the Year Ending December 31, 1908.” AT&T. http://www.porticus.org/bell/pdf/1908ATTar_Complete.pdf.

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 Amazon.com and other successful online retailers changed the way Americans buy everything from books to groceries. Consumers often get better deals than in the past, too; easy comparison shopping means online and bricks-and-mortar stores face real price competition every day.  eBay and other auction sites didn’t just give people an alternative to setting up a yard sale in July – they gave entrepreneurs a platform for creating viable businesses out of their homes.  Monster.com and similar sites gave job seekers instant access to employment listings, worldwide and at every level. Looking for work no longer means waiting for the Sunday newspaper to hit the doorstep.  Craigslist has further eroded the importance of that local newspaper by offering free “classified ads” for any item or service you wish to sell – or give away.  YouTube has given everyone with a video enabled cell phone the ability to post and play videos, instantly, from anywhere.  Netflix and Hulu have had a dramatic impact on the way people watch movies and television.

In fact, look at any consumer or business relationship – banking, trading stocks, watching video of the latest news, interacting with your local government – and the Internet has changed it. During a time when most users had dial-up or relatively slow cable or DSL broadband connections, the Internet enabled the creation of applications and services that, as recently as 10 years ago, were impossible for most people to imagine – and that was with application developers limiting their imagination to the bandwidth the incumbent transport networks could offer. But they did not have to limit their imagination when it came to scope. Almost anyone could get dial-up Internet service.

Now imagine the innovation and possibilities presented by truly competitive and truly high-speed fiber connectivity. Fiber to the premises networks hold the promise of expanding on those previous innovations and acting as a springboard for innovations that most people can’t yet imagine. In education and healthcare – in commerce and entertainment – the potential advances enabled by fiber’s huge bandwidth are of the type that could lift the entire population. A fiber network offers enough bandwidth, for example, to support an interactive, high-definition video link between a teacher and a sick child in a hospital – enabling the child to stay connected to the classroom.

Is it possible to envision what educational opportunities, businesses, or social connections might be on the horizon? Perhaps some but certainly not all. With open access fiber to the premises, the network owner does not have to. The network owner needs to build an environment that does not constrain the imagination of applications developers; an environment that offers bandwidth abundance on large enough scale so that the value of developing applications that take advantage of the capacity of fiber becomes enticing. As applications are deployed, their value is typically enhanced by more potential and actual users. New applications will bring new subscribers and new subscribers will inspire new applications.

Sufficient scope fuels network effects. Insufficient scope strangles continuing growth.

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Lessons Learned from UTOPIA and iProvo

As of 2012, UTOPIA had passed 60,000 addresses with limited construction continuing in 2013 and beyond. iProvo has passed 35,000 addresses and has reached the limits of its growth. Neither of the projects on their own – or even combined – represent a sufficient market size to inspire development of new fiber dependent network effect applications.

To truly succeed, markets for fiber projects around the nation need to aggregate their markets for application developers. Cities should not only build their metropolitan areas but should also put in place support structures that help application developers tie into the markets in Kansas City, UTOPIA, iProvo, Chattanooga, and other very high speed networks.

6.5.1.2 Market Execution In the wholesale/retail split model, network owner revenues primarily come from participating service providers. However, revenues are ultimately generated from sales made to subscribers. The network owner, asset manager, and service providers must be ready to support service provider direct sales, reseller opportunities, neighborhood fiber advocacy, and other sales models.

Malcolm Gladwell’s book The Tipping Point: How Little Things Can Make a Big Difference44 identifies a factor that will be a key to success in securing subscribers to Municipal Broadband in San Pablo; he calls this, The Law of the Few. This includes a type of individual whom he labels a “Maven”…these are people who collect information – especially about the marketplace – almost as if it were a hobby. Gladwell writes, “Mavens” are critical to the diffusion theory as they are the trusted sources or opinion leaders to whom the early majority turns. The unbiased recommendation of a maven is the greatest influencer to overcome (or reinforce) the early majority’s resistance to their knee jerk reaction to buy a new service.

Far more central to maximizing ‘Take Rates’ for Municipal Broadband in San Pablo, however, is the impact on prospective adopters (local businesses and local residents) of Early Adopters (which Gladwell refers to) on those in the Mainstream Market. “Figure 41: Crossing the Chasm, Dr. Geoffrey A. Moore, Harper Business, NY, 1999” (below) is an adaptation of the classic model of Diffusion of Innovations (4th Edition, New York: The Free Press, 1995) — created by Dr. Elihu Katz and popularized by the “father” of Diffusion Theory, Dr. Everett M. Rogers. While trying to apply Rogers’ Diffusion paradigm, an organizational theorist and management consultant, Dr. Geoffrey A. Moore, discovered that there is, in fact, a major barrier between Early Adopters and the Early Majority, which Moore labeled a “chasm”…thus, the invention of Chasm Theory.45

44 Gladwell, Malcolm (29 February 2000). The Tipping Point: How Little Things Can make a Big Difference. Little Brown and Company. 45 Moore, Geoffrey A. (1999). Crossing the Chasm. Harper Business, New York.

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Figure 41: Crossing the Chasm, Dr. Geoffrey A. Moore, Harper Business, NY, 1999

Moore said that in order to successfully introduce a new product or idea into a given market, that you have to “cross” the chasm (this barrier); he argued that this would typically require employing what is known as “Guerilla Tactics” in order to charge through the barrier. He went so far as to say that it may be necessary to treat the prospective customer as “the enemy”. At the end of the day, however, this approach was NOT successful. This was basically due to two problems.

First, since the creation of Diffusion theory, no one (including Rogers and Moore) had been able to definitively and empirically pull out the 13.5% of Early Adopters from a given market or social system; and, without this, it is virtually impossible to employ any form of message strategy for persuading perspective users to adopt whatever is being promoted.

Second, SRI’s Dr. G. Gary Manross (while working with his mentor, Dr. Rogers) argued that applying guerrilla tactics was simply wrong…to the contrary, for successful adoption to take place, it is essential to employ “Relationship Marketing” strategies as opposed to guerrilla tactics. Manross states, “If you treat any prospective client as ‘the enemy’…you can anticipate that s/he will treat you in the same manner.” Beyond that, Manross set out to design an algorithm that would, indeed, empirically and definitively identify Early Adopters and separate them out from the Mainstream.

Manross was successful in creating and testing an algorithm that proved, without exception, to identify Early Adopters in any market or social system. As a result, he modified Moore’s model and subsequently co-authored a paper with Dr. Rogers (which will ultimately become a book) entitled: Closing the Chasm: 46 Between Early Adopters (Opinion Leaders) and the Mainstream). To date, SRI has applied this model literally hundreds of times in securing desired behavioral outcomes (e.g., purchase decisions and voting decisions) in both the private and public sectors. This proven adoption model was employed in

46 Manross, G. Gary and Everett M. Rogers. Closing the Chasm: Between Early Adopters (Opinion Leaders) and the Mainstream. Strategy Research Institute. 2004.

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SAN PABLO BROADBAND PLANNING October 14, 2015 conducting the market research for the present project on behalf of the City of San Pablo and will drive the public outreach and marketing effort for introducing Municipal Broadband to both the business/commercial and residential sectors in San Pablo.

Nonetheless, to date, it has been a struggle to achieve projected take rates when introducing Municipal Broadband into local markets, however, many (indeed most) municipal projects struggle to achieve projected take rates; in fact, take rates have languished at between 15% and 17% for most of UTOPIA’s 47 history. In other words, marketers of Municipal Broadband have not, to date, been able to “cross” Moore’s chasm.

Take Rate Through Time 25.0%

20.0%

15.0%

10.0%

5.0%

0.0% 3/7/2005 3/7/2006 3/7/2007 3/7/2008 3/7/2009 3/7/2010 3/7/2011 3/7/2012

Figure 42: UTOPIA Take Rates over Time

The iProvo project has experienced very similar results to that of UTOPIA.

Unfortunately, as depicted in “Figure 43: Fiber Project Monthly Revenue and Expense” generic feasibility modeling suggests a fiber to the premises project needs to reach about a 30% take rate to meet financial obligations.

47 UTOPIA management chose NOT to employ the ‘intelligence’ that came out of the market research that was done on their behalf that was predicated on ‘Closing the Chasm’, which explains (at least in part) why they’ve never been able to meet their projected take rates.

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Total Monthly Revenue and Expense $6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $0 ($1,000,000) ($2,000,000) ($3,000,000)

Debt Service OpEx Margin Monthly Net

Figure 43: Fiber Project Monthly Revenue and Expense

The question must be asked, “What about these projects’ market execution keeps them from passing take rate thresholds required to make them financially successful?”

In 2003, UTOPIA contracted Dean & Company to conduct a feasibility study. Dean & Company concluded with three recommendations to create a strategic focus on several factors that are key to maximizing the economic value created by the project. These recommendations included:

 Capitalize fully on perceived Local/Community advantage in marketing UTOPIA-based services  Recruit providers of unique FTTH-intensive applications to differentiate UTOPIA from Comcast and Qwest broadband capabilities, e.g. telecommuting, entertainment-on-demand, gaming, home networking . . .  Strong focus on serving the business community to capture the productivity benefits of fiber broadband. UTOPIA’s sponsors should develop an integrated economic development plan around the benefits of a fiber infrastructure

According to Manross, the answer to this question is to properly apply the proven model called, Closing the Chasm. He points out that the adoption process begins with the notion that when prospective adopters (e.g., buyers) become aware of a new product, service and/or idea that is appealing to them; the KNEE JERK reaction is, in fact, a desire to adopt (purchase), or at the very least, give the innovation a try. In the short term, the knee jerk reaction leads to a decision to purchase.

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What is different between those individuals in the Early Market (visionaries) and those in the Mainstream Market (pragmatists) is that the former (visionaries) are far more likely to act on their knee jerk desire to adopt (purchase the product); while the latter (pragmatists) are inherently not risk takers. As a result, before adopting (making a decision to purchase), those in the Mainstream Market feel compelled to first “check it out” with someone they trust (an opinion leader); then make the decision to purchase or not to purchase. The higher the level of risk (e.g., the higher the price), the more likely pragmatists are to seek advice from someone they trust before making a decision to purchase.

Thus, what is likely to happen if:

 The visionary to whom the pragmatist turns to for advice isn’t aware of the product/service for which the inquiry is being mad?, or worse…  The visionary is, indeed, aware of the product/service, but does NOT perceive it as having sufficient value to purchase?, or equally problematic…  The visionary likes the product/service for which the inquiry is being made, but the visionary’s reasons for adopting the innovation have nothing to do with the pragmatist’s reasons for being interested in the innovation?...

Clearly, the likelihood is high that each of the above scenarios will result in a decision on the part of the pragmatist NOT TO BUY…

Without executing specific efforts to overcome the pragmatist inclination not to buy, the municipal project should expect take rates that include innovators and early adopters – or about 17% of the available market.

Lessons Learned from UTOPIA and iProvo

Neither iProvo nor UTOPIA created marketing efforts that would encourage early adopters to share positive experiences and recommend the network to the early majority. In fact, UTOPIA was greatly hampered by the fact that service availability has languished in a quilt like pattern due to lack of capital funds. This quilt like availability makes it so that even if an early adopter makes a recommendation, the potential subscriber may not be able to get service. The dampening effect of this quilt like availability on take rates is dramatically represented in a comparison between two UTOPIA cities: Payson and Lindon. In both Payson in Lindon, some construction was finished in Phase I of the UTOPIA project 2004-2005. Both projects then languished until 2007 when Lindon was largely completed and Payson was not.

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Figure 44: Lindon Available Addresses (in green)

“Figure 44: Lindon Available Addresses (in green)” shows available addresses in Lindon after 2007 construction was complete. The unavailable areas (in gray to the west and east of the bulk of the town) are largely undeveloped.

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Figure 45: Payson Available Addresses (in green)

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“Figure 45: Payson Available Addresses (in green)” shows available addresses in Payson after Phase II construction (2007). While much of the outlying areas of Payson are undeveloped, the unavailable area in the center of the map represents the majority of addresses in Payson.

So, what was the take rate impact of availability and the power of word of mouth marketing as early adopters make recommendations to other potential customers?

Lindon Network Effect vs. Payson no Network Effect 35.0%

30.0%

25.0%

20.0%

15.0%

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0.0% 6/13/2005 6/13/2006 6/13/2007 6/13/2008 6/13/2009 6/13/2010

1/4 of Total Lindon Address % Lindon Take Rate 1/4 of Total Payson Address % Payson Take Rate

Figure 46: Lindon vs. Payson Take Rates

“Figure 46: Lindon vs. Payson Take Rates” shows Lindon experienced a significant increase in take rate (that is percentage of subscribers versus available homes) after the 2007 Phase II construction and Payson did not.

Of course some of the boost may have been from network effects or other factors. Nonetheless, the lesson learned is to ensure mechanisms are in place to close the diffusion chasm between the early adopters and the early majority to get beyond 17% take rates.

6.5.1.2.1 Community Benefits A municipal fiber to the premises network can provide community benefit without the stigma of generating profits for a behemoth out of town provider. These benefits can include economic development, education opportunities, health care advantages, civic engagement opportunities and others. All of the potential benefits of a municipal fiber network exist to one extent or another in the iProvo and UTOPIA networks. However, neither community has done an effective job of highlighting

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SAN PABLO BROADBAND PLANNING October 14, 2015 them. A quick search for either project will reveal a long list of articles about them – most of them dealing with the projects’ financial struggles and the projects’ teams’ responses to criticisms about their financial struggles.

The interlocal agreement that chartered UTOPIA states, “WHEREAS, this joint effort in creating a wholesale telecommunication utility makes the most efficient use of the Members’ powers in a mutually advantageous way, including the benefit of economy of scale, which will facilitate superior services to residences and businesses; enhance government administration; provide more functional buildings and grounds; support better educational opportunities, health care, and police and fire protection; and spur economic development.” This chartering statement indicates the network will:

 Facilitate superior services to residences and businesses,  Enhance government administration,  Provide more functional buildings and grounds,  Support better educational opportunity, health care, and police and fire protection, and  Spur economic development

However, when we look at UTOPIA’s web site (http://www.utopianet.org), we can learn about residential and business services but we cannot find anything celebrating how the project meets the other chartering objectives. It is almost as if UTOPIA has abdicated its chartered responsibility and abandoned the community benefits message Dean & Company suggested the project focus on.

Lessons Learned from UTOPIA and iProvo

Community benefits are an important reason municipalities undertake to build broadband networks. If the network operators fail to highlight the community benefits, they are reduced to competing with incumbent providers on the incumbent provider’s terms.

In both the iProvo and UTOPIA projects, early project leaders focused on the financial benefits the projects would bring the cities. Project leaders suggested the networks would become not only self sufficient enterprise funds but that they would generate profits that could be used for other community enhancing projects. When the projects failed to produce the revenues to do so, the perceived community benefit was also lost. Public projects should focus on the community benefits intrinsic in the community network, not those that can come as a secondary benefit as revenues are (or are not) generated from the network.

6.5.1.2.2 Differentiation Dean & Company recommended to UTOPIA that the project “recruit providers of unique FTTH-intensive applications to differentiate UTOPIA from Comcast and Qwest [now CenturyLink] broadband capabilities…” The same advice could easily have gone to the iProvo project. Doing so would have created a reason to subscribe to the fiber network over the incumbents and would have helped create a virtuous cycle of network effects.

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Unfortunately, neither network was able to recruit providers willing to offer fiber intensive applications. In point of fact, both networks restricted their ability to do so by providing wholesale packages that encouraged service providers to offer services very similar to the incumbents. Rather than creating the environment of bandwidth abundance and application innovation that a fiber network should offer, UTOPA’s and iProvo’s wholesale packages encouraged marketing bandwidth scarcity and forced service providers to think of services in traditional triple play silos.

Lessons Learned from UTOPIA and iProvo

A fiber to the premises network is significantly different than a traditional copper based network. Municipal fiber projects must emphasize bandwidth abundance and innovative application delivery.

If the municipal project is not able to recruit innovative application providers, the project may have to develop innovative services it makes available to its service providers on a wholesale basis.

6.5.1.2.3 Business Community The Dean & Company feasibility report suggested a “Strong focus on serving the business community to capture the productivity benefits of fiber broadband.” Both UTOPIA and iProvo indicated they were focusing on businesses, but their practices demonstrated otherwise.

First, UTOPIA and iProvo chose pricing models that charged businesses higher rates than residential subscribers – not because the services being delivered were better than residential services, but rather simply because the subscriber was a business. This pricing model is a legacy arbitrage model based on the days when incumbent providers were forced to compensate for regulated thin margin residential price caps by charging businesses premiums. While the industry accepts the practice, it does not represent a strong focus on serving the business community.

Next, UTOPIA and iProvo chose to handle business order fulfillment differently than residential order fulfillment. In both projects cases, the business order fulfillment timeline was significantly longer than the residential order fulfillment timeline. The business order fulfillment timeline penalty discourages businesses from switching to the community networks.

Finally, neither UTOPIA nor iProvo established relationships with business service integrators or built any kind of effective business channel partnering.

In sum, saying you have a focus on businesses does not mean that you do.

Lessons Learned from UTOPIA and iProvo

The residential marketplace represents the vast majority of potential subscribers for a ubiquitous fiber to the premises deployment. Some fiber over-builders (like Google) have elected to focus almost exclusively on the residential marketplace. However, a true focus on businesses can help spur revenues and accelerate take rates for both business and residential subscribers. The focus has to be substantial and more than simply words.

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6.5.1.3 Financial Planning Both UTOPIA and iProvo made three critical financial planning mistakes:

1. Neither project included sufficient capital for customer connections.

2. Neither project established financial backstops, guarantees, or insurance mechanisms.

3. Both projects advertised early that they would not only be self sufficient, but would also generate revenue for their participating cities.

UTOPIA further exacerbated its financial distress by not having sufficient funding secured to finish the scope of the project at the project’s outset.

6.5.1.3.1 Include Sufficient Capital for Customer Connections Both UTOPIA and iProvo deferred drop level infrastructure costs to the order fulfillment process. Because of this, financial analysts for both projects considered drop level infrastructure costs to be operational costs, not a capital costs. Averaged over time, drop level infrastructure has little impact on operations. However, in the initial weeks and months after a service area becomes available, new connections consume significant resources. This imbalance can tip the project into failure – especially if there is no source of funds for customer drops.

6.5.1.3.2 Establish Financial Backstops UTOPIA and iProvo are frequently used by opponents of municipal projects as case studies of why cities should not get engaged in broadband projects. The argument goes that municipal projects are financial drains on the cities that try them, because municipal broadband represents a group of broadband amateurs entering a very competitive marketplace. Returning to Senator Pugh’s op-ed, “Those who want to win the argument about whether government can stimulate a struggling economy would be well advised to stick with what we know works and stay away from fanciful boondoggles.”

There is certainly financial risk involved in building a municipal broadband network. However, we believe we have found mechanisms to guarantee against that risk. We propose using a life settlement investment vehicle to create a principal assumption and repayment program – thus removing principal repayment from the project’s debt service model. We further propose using an annuity based performance bond to guarantee project success.

Of course these insurance policies come at a cost. To create a near zero financial risk project, we would nearly double the capital outlay required at the outset of the project. However, the financial backstops are designed to protect not only the capital required to build the network, but also the capital required to protect the investment.

In sum, we suggest that we can build an open access fiber to the premises network at near zero financial risk to the funding city.

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6.5.1.3.3 Do Not Focus Conversation on Excess Positive Revenue Municipal networks have many community benefits. One of them might be generating positive cash flow that can be transferred to other community development projects. Unfortunately, UTOPIA and iProvo emphasized positive cash flow as a key benefit of the projects. When positive cash flow failed to materialize, opponents of the projects had an easy time arguing the projects were failures.

6.5.1.3.4 Secure Sufficient Funding to Finish the Project The UTOPIA project originally envisioned three phases of construction. Because of restrictions in Utah law, the project was only able to use tax-backed bonds for the first phase of the project. The intent was that revenues from the first phase would be sufficient to justify revenue bonds for additional construction. When revenues were insufficient to justify revenue bonds, UTOPIA had no backup plan and was left with a partially completed quilt-like footprint of available addresses.

6.5.1.4 Network Design Network design must accommodate the guiding principles of:

 Open access offering wholesale services to all qualifying service providers,  Carrier-class security, functionality, and reliability,  High scalable bandwidth, and…  Based on an open and independent architecture.

UTOPIA and iProvo had very similar network designs – network designs that were well suited to support the success of the projects, if the other success requirements had been met. The two projects made different electronics choices and different configuration choices, but architecturally the networks are very similar active Ethernet designs.

6.5.2 It is a COMMUNITY Network Having provided an introduction to financially responsible ubiquitously deployed public open access fiber to the premises and lessons learned from similarly proposed projects, it is appropriate to discuss that it is first and foremost a community endeavor before delving into more detail regarding the proposed solution. From the outset of each public open access project, the key stake holders must consider how their efforts will benefit the network owner, those financing the solution, the supported community anchor institutions, incumbent providers and network owners, and for the community’s residents and businesses.

6.5.2.1 Win for the Community Communities that choose to upgrade their telecommunications infrastructure to 21st century open access fiber to the premises should expect to see economic development benefits as new businesses come into town to take advantage of the true choice of true broadband only open access fiber to the premises can offer. Further economic development benefits come as ubiquitously available broadband increases productivity, entrepreneurial opportunities evolve, and more workers take advantage of their new-found capability to work from.

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Through ubiquitous deployment of very high-speed broadband, cities can better manage traffic with enhanced sensors and cameras. Fire departments can have better access to information to save lives and stop the spread of fires. Intelligent alarm systems can even notify fire crews faster helping ensure quicker responses and minimizing damage. Police can monitor sensitive areas with cameras and, given proper integration, can control lighting, electronic locks, and other systems in their pursuit of community safety.

Utility providers in the community can better monitor and control the delivery of their services. Better monitoring and control helps utility providers meet consumer demand while simultaneously conserving resources.

Economic development. Public safety. Conservation. These and many other quality of life improvements are possible through effective deployment of public open access fiber to the premises.

6.5.2.2 Win for Financial Supporters Deploying fiber to the premises is a capital intensive proposition. Some business analysts have argued that the wholesale-retail split model implemented in a truly open access network is not financially feasible because the network owner abandons service (or application) margins, loses control of the retail marketing environment, and abandons most price discrimination48 opportunities.

While these concerns exist, a financially responsible project takes reasonable precautions to protect its financial supporters. While we will address these business analyst issues in more detail later, let’s take a brief look at each of them here:

1. Service (Application) Margins Revenues from a traditional market funded vertically integrated monopoly provider must cover capital costs, operations, and profits. A publicly provided open access telecommunications utility typically has no profit motive. The public network owner need only generate revenues sufficient to cover capital costs and network operations. Service (or application) margins retained by the private service providers taking advantage of the network can generate profits for their owners, be reinvested to develop innovative applications, or both. 2. Retail Marketing Control A network owner in an open access model should avoid unnecessary interference with their private service providers marketing efforts but that does not mean they have to sacrifice all influence. In fact, clear brand use guidelines, robust awareness campaigns, and effective neighborhood fiber advocacy programs offer the network owner significant retail marketing power and responsibility. 3. Price Discrimination

48 That is, the ability to offer a variety of products, some of which generate more revenue or offer higher margins.

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If the network owner elects a dark fiber leasing only model, they put themselves in a position of minimal price discrimination opportunity. If the network owner offers lit services and builds a suite of wholesale applications, they create a robust price discrimination environment.

Anupam Banerjee and Marvin Sirbu of Carnegie Mellon University researched the financial implications of the open access model and published their results in the paper “FTTP Industry Structure: Implications of a wholesale retail split.”49 They conclude, “In spite of interfering with a wholesaler’s ability to price discriminate, a wholesale-retail split is economically feasible. A wholesaler can recover its cost and as long as a significant number of homes do not have a zero willingness to pay for broadband data service, a wholesaler is almost as profitable as a vertically integrated entity.” Further, “Even in the presence of a (cable) incumbent that offers voice, video and data services, a wholesaler is as likely to recover its costs as a vertically integrated entity.”

In sum, a financially responsible project can effectively provide for its financial backers’ return on investment.

6.5.2.3 Win for Community Anchor Institutions We touched on potential benefits of a fiber to the premises network for fire and police departments. We cannot neglect the striking benefits available to other community anchor institutions.

True broadband can:

 Improve government efficiencies and make public services and the tools of democracy more readily available to the citizens of participating communities,  Extend classrooms into homes and across communities making education more accessible and more integrated with students’ lives,  Offer healthcare monitoring to vulnerable populations increasing their care while simultaneously reducing the resources (and costs) associated with providing that care,  Expand libraries well beyond the walls enclosing their collections brining the world to the community and the community to the world, and  Otherwise support public services.

6.5.2.4 Win for Incumbent Providers and Network Owners Many communities considering deploying telecommunications infrastructure as a public utility face opposition from incumbent service providers – especially facilities based providers who often have extensive networks of their own. Some states, largely under the influence of incumbent provider

49 Banerjee, Anupam and Marvin Sirbu (June 2008). “FTTP Industry Structure: Implications of a wholesale retail split.” Carnegie Mellon University. Retrieved 12 September 2011 from http://web.si.umich.edu/tprc/papers/2006/648/Banerjee_Sirbu%20TPRC_2006.pdf.

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SAN PABLO BROADBAND PLANNING October 14, 2015 lobbyists, have even established prohibitions preventing municipalities from deploying public utility telecommunications networks50.

However, a compelling argument can be made that a community fiber network is an extremely valuable asset for incumbent providers. Wall Street puts some significant pressure on incumbent providers to control their infrastructure costs (see Saul Hansell, “A Bear Speaks: Why Verizon’s Pricey FiOS Bet Won’t Pay Off”51 for example). Based on an effective community fiber to the premises network, incumbents can migrate out of the capital intensive business of building, maintaining, and upgrading their physical infrastructure and focus on providing extraordinary services to retail customers.

6.5.2.5 Win for Residents and Businesses The public open access fiber to the premises model extends true choice of true broadband to all residents and businesses.

First, without powerful penalties in franchise agreements or other regulatory requirements, most private companies are inclined to build and support only areas where they can extract the greatest profits. This would leave poorer areas or areas that are more costly to build to unserved or underserved by the incumbent providers. A ubiquitously deployed public infrastructure solution overcomes this challenge and extends true broadband to all businesses and residents in the community.

Next, broadband has many “definitions”. The National Broadband Map defines broadband as “a high- speed, always-on connection to the Internet” and states “[f]or information to be included on the National Broadband Map, the technology must provide a two-way data transmission (to and from the Internet) with advertised speeds of at least 768 kilobits per second (Kbps) downstream and at least 200 Kbps upstream to end users.”52 Always on and sub 1Mbps download speeds – that’s a pretty low bar. True broadband should be sufficient bandwidth for anything you may do today and should have a reasonable upload path for the things you may want to do tomorrow. Broadcast and digital cable TV quality high definition video requires about 16 Mbps. Blue-ray quality video consumes about 35 Mbps. Small screen high definition video conferencing requires at least 1.5 Mbps upload speeds. Surely our 21st century definition of broadband should support the needs of today and offer speed tiers starting at 30 Mbps and going to 1 Gbps and above. Public open access fiber to the premises can offer true broadband.

Finally, in most communities, broadband is available from one or two wireline providers and two or three wireless providers. Calling this choice recalls the cliché attributed to Henry Ford, “You can have

50 The Baller Herbst Law Group does a very good job of summarizing state preemption laws at http://baller.com/comm_broadband.html#barriers. The Baller Herbst data is visually summarized by Community Broadband Networks (http://www.muninetworks.org/) on their Community Broadband Network Map at http://www.muninetworks.org/communitymap. 51 Hansell, Saul (19 August 2008). “A Bear Speaks: Why Verizon’s Pricey FiOS Bet Won’t Pay Off.” The New York Times: Bits. Viewed 4 August 2012 at http://bits.blogs.nytimes.com/2008/08/19/a-bear-speaks-why-verizons- pricey-fios-bet-wont-pay-off/. 52 See http://www.broadbandmap.gov/classroom.

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October 14, 2015 SAN PABLO BROADBAND PLANNING any color Model T so long as it is black.” Walk into a grocery store and see if there are more than three to five bakeries represented in the bread aisle. True choice – generating real competition – demands a broad range of service providers. Unfortunately, spectrum limitations and infrastructure costs limit the number of broadband providers that can serve a given market. That is unless the community has deployed an open access network that can support multiple providers simultaneously.

6.6 Glossary 2G: In the world of cell phones, 2G signifies allocation for cellular service by the FCC in second-generation wireless digital 1970 and first introduced by AT&T in 1983. technology. Fully digital 2G networks Aerial: Infrastructure placed in above ground replaced analog 1G, which originated in the installations. 1980s. Aggregation: See Demand Aggregation. 2G networks saw their first commercial light of day on the GSM standard. GSM stands for Aggregation Point: Aggregation point is used to global system for mobile communications. describe a) a location where multiple fiber runs come together or b) a network location 3G: Third generation of the mobile telephony where multiple sites aggregate traffic. standard. Analog cellular was the first generation and digital PCS the second. AMPS: See Advanced Mobile Phone Service. 4G: Abbreviation for fourth-generation wireless. Analog: Relating to or using signals or Specifies a mobile broadband standard information represented by a continuously offering both mobility and very high variable physical quality such as spatial bandwidth. Usually refers to LTE and WiMax position or voltage. technology. Analog Reclamation: In a cable system, refers to repurposing spectrum previously used to Access Level Infrastructure: Infrastructure required to deliver services from the carry analog channels for other uses for community cabinet or hub to the customer digital channels or high-speed data. access point. Access level infrastructure ties AP: See Access Portal. to distribution rings at the community ARPU: See Average Revenue Per User. cabinet and to drop level infrastructure at Asymmetric Digital Subscriber Line (ADSL): A the customer premises. Access level technology that transmits a data signal over infrastructure is typically part of the local twisted-pair copper, often over facilities loop. deployed originally to provide voice Access Portal (AP): The transceiver or media telephony. Download rates are higher than converter device that terminates a fiber upload rates - i.e., are asymmetric. ADSL network at the customer’s premises. Other technology enables data transmission over names for the AP include Optical Network existing copper wiring at data rates several Termination (ONT) or Ethernet Demarcation hundred times faster than analog modems Device (EDD). using an ANSI standard. ADSL: See Asymmetric Digital Subscriber Line. Name Download Upload Advanced Mobile Phone Service (AMPS): A ADSL 8.0 Mbps 1.0 Mbps ADSL (G.DMT) 12.0 Mbps 1.3 Mbps standard system for analog signal cellular ADSL over POTS 12.0 Mbps 1.3 Mbps telephone service in the United States and ADSL over ISDN 12.0 Mbps 1.8 Mbps elsewhere. It is based on the initial ADSL Lite (G.Lite) 1.5 Mbps 0.5 Mbps electromagnetic radiation spectrum ADSL2 12.0 Mbps 3.5 Mbps

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RE-ADSL2 5.0 Mbps 0.8 Mbps you download a photo in two seconds or two Splitterless ADSL2 1.5 Mbps 0.5 Mbps minutes. ADSL2+ 20.0 Mbps 1.1 Mbps ADSL2+M 24.0 Mbps 3.3 Mbps BHOL: See Busy Hour Offered Load. Asymmetrical: Internet connections have two BICC: See Bearer Independent Call Control. components - a downstream and upstream. Bit: The base unit of information in computing. When the two speeds are not comparable, For our purposes, also the base unit of the connection is termed asymmetric. measuring network speeds. 1 bit is a single Typically, phone and cable companies offer piece of information – a one or zero, on or much slower upload speeds than download, off, true or false. Network speeds tend to be in part because the Internet tended to be a measured by bits per second – using kilo download-centric system in the 90's and (1,000), mega (1,000,000), and giga early 00's. However, users increasingly need (1,000,000,000). A bit is a part of a byte – faster upload connections to take full they are not synonyms. Bits are generally advantage of modern applications. abbreviated with a lower case b (as in Mbps). Asynchronous Transfer Mode (ATM): A means Bits are used to measure network speeds. of digital communications that is capable of Bytes (abbreviated with an upper case B – as very high speeds; suitable for transmission of in MB) are used to measure storage space images or voice or video as well as data; ATM and file sizes. is used for both LAN and WAN. That smash hit two hour long high definition movie you want to download is probably 8+ AT&T U-Verse: An AT&T brand of triple-play GB. If you want to download it on a standard telecommunications services delivered via DSL line, you better have about six hours (8 fiber to the node. billion bytes * 8 bits = 64 billion bits / 3 ATM: See Asynchronous Transfer Mode. million bits per second = 5.9 hours). Availability Gap: See Broadband Availability BPON: See Broadband Passive Optical Network. Gap or Investment Gap Broadband: According to the FCC, 4 Mbps Average Revenue Per User (ARPU): “Average download and 1 Mbps upload. True revenue per user is calculated by dividing broadband provides exponentially faster revenues by the subscriber base. Non- speeds and is often symmetrical. service revenues, such as equipment or other Broadband Availability Gap: Either a) The sales, are included in the calculation.” From amount of funding necessary to upgrade or http://www.yourdictionary.com/finance/arp extend existing infrastructure up to the level u. necessary to support the National Broadband While the accurate calculation of ARPU Availability Target. Because this is a financial requires inclusion of non-service revenues, metric it is referred to as the Investment many organizations exclude them when Gap. Or b) the difference in bandwidth and calculating ARPU . services available between two geographic Backhaul: A general term for the segment of a areas, socio-economic strata, age generation, network connecting the network to an ethnic groups, or other groups. Internet peering point. Broadband Friendly: Policies designed to lower Bandwidth: The rate at which the network can the costs and risks of deploying broadband in transmit information across it. Generally, a community. higher bandwidth is desirable. The amount Broadband Passive Optical Network (BPON): A of bandwidth to you can determine whether type of PON offering downstream capacities

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of up to 622 Mbps and upstream capacities they all share one cable to the Internet. of up to 155 Mbps shared among a limited Because the cable network shares the last number of end users. mile connection among potentially hundreds Broadband Technology Opportunities Program of subscribers, a few bandwidth hogs can (BTOP): The Department of Commerce slow everyone’s experience. broadband funding program. Cable Television (CaTV): In its original Brownfield: Brownfield neighborhoods are incarnation the acronym was CATV standing neighborhoods that are already build out and for Community Antenna or Community typically have existing roads, sidewalks, Access Television. The CaTV acronym stands landscaping, and other impediments to for Cable Television. In either case, cable network deployment. Brownfield television uses coaxial cable to deliver video neighborhoods typically have existing signals from a single receiver to multiple networks requiring new entrants to overbuild homes. Cable television technologies almost unless the incumbent is required to always “broadcast” all available channels on unbundle. the cable and rely on in home tuners to select a channel from the broadcast stream. BTOP: See Broadband Technology Opportunities Program. CAF: See Connect America Fund. Burst Rate: The maximum rate or “speed” CAI: See Community Anchor Institution. which a network is capable of delivering CAP: See Customer Access Point. within a short timeframe – typically seconds Capacity: Ability of telecommunications or minutes. This is usually expressed as a infrastructure to carry information. The rate in Mbps. Many network providers measurement unit depends on the facility. A report their burst rate as their maximum data line’s capacity might be measured in advertised speed. bits per second while the capacity of a piece Busy Hour Offered Load (BHOL): BHOL (per of equipment might be measured in numbers subscriber) is the network capacity required of ports. by each user, averaged across all subscribers CapEx: See Capital Expenditure. on the network during the peak utilization hours of the network. Network capacity Capital Expenditure (CapEx): Business expense to acquire or upgrade physical assets such as required is the data received/transmitted by a subscriber during and hour; this can be buildings, machinery, network infrastructure, expressed as a data rate (like Kbps) when the etc. Also called capital spending or capital volume of data received/transmitted is expense. divided by the time duration. Carrier Neutral Location: A CNL is a local peering point location where multiple middle Byte: The base unit for file storage comprised of 8 bits. A 1 MB (megabyte) file is made of 8 mile providers can meet and provide service million bits. Bytes generally refer to the size to multiple last mile providers. of storage whereas bits are used to discuss CATV: See Community Antenna Television. how rapidly files may be moved. CaTV: See Cable Television. Cable Modem System: Cable television CDMA: See Code-Division Multiple Access. companies have offered Internet access via Cellular: Denoting or relating to a mobile their cable systems since 1997. The network telephone system that uses a number of architecture uses a loop that connects each short-range radio stations to cover the area subscriber in a given neighborhood, meaning that it serves.

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Census Block: The smallest level of geography to occupy a single transmission channel designated by the US Census Bureau which optimizing the use of available bandwidth. may approximate actual city street blocks in The technology is used in ultra-high- urban areas. In rural districts census blocks frequency (UHF) cellular telephone systems may span larger geographical areas to cover in the 800-MHz and 1.9-GHz bands. a more dispersed population. COG: See Council of Governments. Center for Information Technology Leadership Community Anchor Institution (CAI): non-profit (CITL): See http://www.citl.org/. and government organizations that provide Central Office (CO): A telephone company essential services to the public. Universities, facility in a locality to which subscriber home colleges, community colleges, K12 schools, and business lines are connected on what is libraries, health care facilities, social service called a local loop. The CO has switching providers, government and municipal offices equipment that can switch calls locally or to are all community anchor institutions. long-distance carrier phone offices. Community Antenna Television (CATV): Early Churn: The number of subscribers who leave a cable television systems were called service provider over a given period of time, community antenna television, or CATV, usually expressed as a percentage of total because by nature of their design they used a customers. using antenna for multiple viewers. This was CITL: See Center for Information Technology usually done to bring television signals into Leadership. basins or other areas obstructed from receiving over the air signals. A single CLEC: See Competitive Local Exchange Carrier. antenna would be placed on a hill or other Cloud: Some refer to the entire Internet as a area where signals could be received and cloud – the idea being that all the cable would be used to distribute the signal information is just out there and it does not to the homes where access was obstructed. matter where. More commonly, cloud Community Cabinet: A remote switch location computing refers to services such as designed to support a single service area or Amazon’s S3 where users pay a fee to store footprint. information on Amazon’s servers without ever really knowing the physical location. Community Connect Grant: The Community Cloud services may include storage, Connect program serves rural communities applications, and other services. As we gain where broadband service is least likely to be access to faster Internet connections available, but where it can make a (particularly upstream speeds) cloud services tremendous difference in the quality of life may offer a more efficient means of for citizens. The projects funded by these accomplishing tasks and more reliable grants will help rural residents tap into the backup solutions. enormous potential of the Internet. CNL: See Carrier Neutral Location. Competitive Local Exchange Carrier (CLEC): The term and concept coined by the CO: See Central Office. Telecommunication Act of 1996 for any new Code-Division Multiple Access (CDMA): Any of local phone company that was formed to several protocols used in so-called second- compete with the ILEC. generation (2G) and third-generation (3G) Conduit: A reinforced tube through which wireless communications. cabling runs. Conduit is useful both to As the term implies, CDMA is a form of protect cables in the ground and because multiplexing which allows numerous signals one can place conduit underground when

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convenient (like when other utility work is Digital Subscriber Line (DSL): A family of underway) and later blow or pull cable technologies that provide digital data through the conduit. transmission over the traditional copper Connect America Fund (CAF): The reformation wires of a telephone network. The common of the USF to support broadband DSL technologies used in the US are deployment. Asymmetric Digital Subscriber Line (ADSL) and Very High Speed Digital Subscriber Line Core: See Network Core. (VDSL). Coverage: Refers to the geographic area in Digital Subscriber Line Access Multiplexer which one can obtain service. Sometimes (DSLAM): Technology that concentrates or referred to as a service area. aggregates traffic in DSL networks. Located CPE: See Customer Premises Equipment. in the central office or in a remote terminal. Customer Access Point (CAP): The splice Distributed Antenna System (DAS): A network location where a subscriber’s drop level of spatially separated antenna nodes infrastructure enters the network. May also connected to a common source via a be called a subscriber Splice Box (SSB). transport medium that provides wireless Customer Drop: See Drop Level Infrastructure. service within a geographic area or structure. Customer Premises Equipment: The family of DOCSIS: See Data Over Cable Service Interface devices used at the customer’s location to Specifications. access network services. Some CPE – like the Distribution Level Infrastructure: AP or cable modem – are provided by the Telecommunications infrastructure intended network owner or service provider. Other to distribute signal to community cabinets. CPE – like telephones and computers – are Distribution Ring: An element of distribution usually provided by the customer. level infrastructure connecting multiple DAS: See Distributed Antenna System. community cabinets. Data Over Cable Service Interface Download: Internet connections have two Specifications (DOCSIS): An international components – a downstream and upstream. telecommunications standard that permits Download refers to the rate at which the the addition of high-speed data transfer to user’s computer can receive data from the an existing cable TV (CaTV) system. It is Internet. employed by many cable television operators Downstream: Generic term referring to data to provide Internet access over their existing traffic going from the network core to the infrastructure. subscriber location. Demand Aggregation: The process of Drop: See Drop Level Infrastructure. combining several clients’ broadband demand into a single purchase. Drop Level Infrastructure: Drop level infrastructure – often referred to as a “drop” Dense Wave Division Multiplexing (DWDM): or “customer drop” is the infrastructure that DWDM is a method of using a single fiber connects the subscriber’s premises to the strand for multiple logical data paths. access level infrastructure. Drop level Dig Once Policies: Broadband friendly policies architecture is part of the local loop. that dictate communications conduit be DS1: A digital signal 1 or DS1 (also known as a added to any underground construction T1). A T-carrier signaling scheme devised by effort. Bell Labs. DS1 is a widely used standard in telecommunications in North America and

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Japan to transmit voice and data between Ethernet Passive Optical Network (EPON): One devices. DS1 is the logical bit pattern used of the family of PON offering downstream over a physical T1 line; however, the terms capacities of up to 1.25 Gbps and upstream DS1 and T1 are often used interchangeable. capacities of up to 1.25 Gbps shared among a Carries approximately 1.544 Mbps. limited number of end users. DS3: A copper digital signal transport with EV-DO: See Evolution-Data Optimized. 44.736 Mbps capacity – or 28 T1 lines – or Evolution-Data Optimized (EV-DO): A 3G 672 voice lines. wireless radio broadband data standard that DSL: See Digital Subscriber Line. enables faster speeds than are available in DSLAM: See Digital Subscriber Line Access existing CDMA networks or other services Multiplexer. such as GPRS or EDGE. Duopoly: A situation in which two companies Fast Ethernet: A network transmission standard own all or nearly all of the market for a given that provides a data rate of 100 Mbps. type of product or service – that is, a two FCC: See Federal Communications Commission. company monopoly. FDMA: See Frequency Division Multiple Access. DWDM: See Dense Wave Division Multiplexing. Federal Communications Commission (FCC): EAGLE-Net: See https://www.co-eaglenet.net/. Federal agency responsible for Earnings Before Interest, Taxes, Depreciation, telecommunications regulation. See and Amortization (EBITDA): An approximate http://www.fcc.gov/. measure of a company’s operating cash flow Fiber Optic Splice Case (FOSC): A protective based on data from the company’s income case at a fiber splicing point. statement. Calculated by looking at earnings, Fiber to the Building (FTTB): One of the families which are calculated by subtracting OpEx and of fiber networks characterized by fiber SG&A from net revenues, before the delivery to a demarcation on or in the deduction of interest expense, taxes, building with distribution to multiple tenants depreciation, and amortization. This within the building through copper or earnings measure is of particular interest in wireless technologies. cases where companies have large amounts of fixed assets which are subjected to large Fiber to the Curb (FTTC): One of the families of depreciation. fiber networks characterized by fiber delivery to the curb. Sometimes FTTC hands the curb EBITDA: See Earnings Before Interest, Taxes, to home connection to a copper or wireless Depreciation, and Amortization. technology. Other times, FTTC is simply a EDD: See Ethernet Demarcation Device. place holder with fiber continuing to the EPON: See Ethernet Passive Optical Network. address once the address subscribes to service. ESRI: ESRI (www.esri.com) is the global leader in geographic information systems. Fiber to the Home (FTTH): One of the families of fiber networks characterized by fiber Ethernet Demarcation Device (EDD): The delivery to the home. FTTH is sometimes transceiver device that terminates the optical used synonymously with FTTP. network at the customer premises in an active Ethernet or EPON design. May also be Fiber to the Node (FTTN): A high-capacity called an access portal (AP) or optical bandwidth approach that uses both fiber and network terminator (ONT). copper wires. Optical fiber is used for the distribution rings from the core of the telco or CaTV network to an intelligent node in the

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neighborhood where copper wire is used for FTTP: See Fiber to the Premises. the local loop connection to the end user. FTTx: See Fiber to the “Whatever”. Fiber to the Premises (FTTP): A fiber Gbps: See Gigabit per Second. deployment/architecture in which optical fiber extends all the way to the customer’s Geographic Information System: Geographic information systems are databases of spatial premises. Also known as fiber to the home data. GIS systems are used to map traffic (FTTH) or fiber to the building (FTTB). flows, contagion patterns, flood plains, and Fiber to the “Whatever” (FTTx): A generic term many other geography dependent features – used to encompass the entire family of fiber like telecommunications outside plant. networks. Gig-E: See Gigabit Ethernet. FiOS: See Verizon Fiber Optic System. Gigabit Ethernet: A network transmission FirstNet: The First Responder Network standard that provides a data rate of 1,000 Authority (FirstNet) is an independent megabits per second. authority within NTIA chartered to provide emergency responders with the first high- Gigabit Passive Optical Network (GPON): A type of PON offering downstream capacities speed, nationwide network dedicated to of up to 2.5 Gbps and upstream capacities of public safety. up to 1.25 Gbps shared among a limited Fisher-Pry Model: A mathematical model used number of end users. to forecast technology adoption when substitution is driven by superior technology Gigabit per Second (Gbps or Gb/s): One billion where the new product or service presents bits per second. Gbps > Mbps > Kbps. some technological advantage over the old As a comparison, a high definition movie with one. surround sound is about 8.3 GB in size. To download this size file with different Fixed Wireless: Wireless service that uses fixed technology transmission speeds: CPE in addition to (or instead of) mobile Or Or Or Days portable devices to deliver data services. Hours Minutes Seconds Fixed wireless solutions have been deployed Standard 56 13.72 329.3 19,761.90 1,185,714 as a substitute for wired access technologies. Dial-Up Kbps For example, it is being used commercially in Fast Dial- 64 12.00 288.1 17,291.67 1,037,500 the US by Clearwire with WiMax and Stelera Up Kbps with HSPA. 1.55 T-1 0.51 12.2 737.78 44,266 FOSC: See Fiber Optic Splice Case. Mbps Standard 3 Franchise: A cable company wishing to provide 0.25 6.1 368.89 22,133 DSL Mbps television service in a community historically 15 signed a franchise agreement with the Fast DSL 0.05 1.2 73.78 4,426 Mbps municipal government. The agreement 20 would specify what the community would Fast Cable 0.03 0.9 55.33 3,320 Mbps receive from the cable company in return for 100 Mbps 100 access to public rights of way. 0.007 0.18 11.07 664 Fiber Mbps FTTB: See Fiber to the Building. 1 Gbps 0.0008 0.018 1.11 66 1 Gbps FTTC: See Fiber to the Curb. Fiber FTTH: See Fiber to the Home. GIS: See Geographic Information System. FTTN: See Fiber to the Node.

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Glenwood Springs Community Broadband HSPA: See High Speed Packet Access. Network (GSCBN): A municipal broadband ICT: See Information Communication deployment in Glenwood Springs Colorado. Technologies. Global System for Mobile Communication ILEC: See Incumbent Local Exchange Carrier. (GSM): A second-generation digital mobile cellular technology using a combination of Incumbent: An existing network owner or service provider. frequency division multiple access (FDMA) and time division multiple access (TDMA). Incumbent Local Exchange Carrier (ILEC): The GSM operates in several frequency bands. dominant local phone carrier within a The standard was jointly developed between geographical area. Section 252 of the European administrations. GSM provides a Telecommunications Act of 1996 defines high degree of security by using subscriber Incumbent Local Exchange Carrier as a carrier identity module (SIM) cards and GSM that, as of the date of enactment of the Act, encryption. provided local exchange service to a specific area. In contrast, competitive access GOIT: See Governor’s Office of Information Technology. providers and competitive local exchange carriers (CLECS) are companies that compete Gompertz Model: A mathematical model used against the ILECs in local service areas. to forecast technology adoption when substitution is driven by superior technology Information Communication Technologies but purchase depends on consumer choice. (ICT): Information and communication based technologies. GPON: See Gigabit Passive Optical Network. Inside Plant (ISP): Electronics, wiring, and other Grand Slam: A triple play with cell phone accouterments associated with service. Sometimes called a quadruple play. telecommunications networks located within Greenfield: A plot of land that will soon become community cabinets, central offices, or other a residential or business development. shelters. Building a broadband network is cheaper in Integrated Services Digital Network (ISDN): A greenfield developments because roads, set of CCITT/ITU standards for digital sidewalks, lawns, and buildings are not yet transmission over ordinary telephone copper impediments to running the necessary wires wire as well as over other media. Home and and the network can be deployed in business users who install an ISDN adapter conjunction with the other utilities. (in place of a telephone modem) receive GSCBN: See Glenwood Springs Community Web pages at up to 128 Kbps compared with Broadband Network the maximum 56 Kbps rate of a modem GSM: See Global System for Mobile connection. Communication. Interconnect: The term interconnect is used in HFC: See Hybrid Fiber Coaxial. two different ways: a) to describe the connection between a service provider and High Speed Packet Access (HSPA): A family of the Internet – also known as backhaul and b) 3G digital data services provided by cellular the logical and physical infrastructure used to carriers worldwide that uses the GSM connect two non-congruous service areas. In technology. HSPA service works with HSPA either case, interconnect is usually part of cell phones as well as laptops and portable the middle mile infrastructure. devices with HSPA modems. The two established standards of HSPA are HSDPA Interexchange Carrier (IXC): A (downlink) and HSUPA (uplink). telecommunications service provider

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authorized by the FCC to provide interstate, IXP: See Internet Exchange Point. long distance communications services and Kbps: See Kilobits per Second. authorized by the state to provide long distance intrastate communications services. Kilobits per Second (Kbps): A measure of Also known as an Interexchange Common transmission speed. Kbps < Mbps < Gbps. Carrier. As a comparison, a high definition movie with surround sound is about 8.3 GB in size. To Interexchange Common Carrier: See download this size file with different Interexchange Carrier. technology transmission speeds: International Standards Organization (ISO): Or Or Or Days The body charged with developing and Hours Minutes Seconds advertising international standards. Standard 56 13.72 329.3 19,761.90 1,185,714 Internet Exchange Point (IXP): See Peering Dial-Up Kbps Fast Dial- 64 Point. 12.00 288.1 17,291.67 1,037,500 Up Kbps Internet Protocol Television (IPTV): A method 1.55 T-1 0.51 12.2 737.78 44,266 of delivering television services using the Mbps Internet Protocol. Standard 3 0.25 6.1 368.89 22,133 Internet Service Provider (ISP): A company or DSL Mbps organization that provides a connection to 15 Fast DSL 0.05 1.2 73.78 4,426 the public Internet, often owning and Mbps operating the last mile connection to the end 20 Fast Cable 0.03 0.9 55.33 3,320 user locations. Mbps 100 Mbps 100 Investment Gap: The amount of funding 0.007 0.18 11.07 664 Fiber Mbps necessary to upgrade or extend existing 1 Gbps infrastructure up to the level necessary to 0.0008 0.018 1.11 66 1 Gbps Fiber support the National Broadband Availability Target. The investment gap is sometimes Last Mile: Describes the final leg of a referred to as the broadband availability gap. connection between a service provider and IP: See Internet Protocol. the customer and is often synonymous with the local loop. In DSL and cable systems, this IPTV: See Internet Protocol Television. is the most common bandwidth bottleneck. Irrevocable Right of Use (IRU): A method of LATA: See Local Access and Transport Area. leasing fiber or other existing telecommunications assets that gives the Latency: The amount of time it takes for a bit to lease an irrevocable right of use for some get from point A to point B. period of time. IRU’s are typically counted as LEC: See Local Exchange Carrier. capital expenses but under some Levelized: A method, often used in regulatory circumstances can be operational expenses. proceedings, to calculate the annuitized IRU: See Irrevocable Right of Use. equivalent – i.e., the effective annual value of ISDN: See Integrated Services Digital Network. cash flows – of the costs and revenues associated with building and operating a ISO: See International Standards Organization. network. A “levelized” calculation provides a ISP: See Internet Service Provider or Inside steady cash-flow stream rather than trying to Plant. model or guess the timing of largely IXC: See Interexchange Carrier. unpredictable yet sizeable real-world payouts like those for upgrading and repairing

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equipment. The present value of a levelized Standard 56 13.72 329.3 19,761.90 1,185,714 cash flow is equal to the present value of Dial-Up Kbps actual cash flows. Fast Dial- 64 12.00 288.1 17,291.67 1,037,500 Line of Sight: Requiring an unimpeded view Up Kbps 1.55 from one site to another. T-1 0.51 12.2 737.78 44,266 Mbps Link Budget: A calculation involving the gain Standard 3 0.25 6.1 368.89 22,133 and loss factors associated with the DSL Mbps antennas, transmitters, transmission lines 15 Fast DSL 0.05 1.2 73.78 4,426 and propagation environment used to Mbps determine the maximum distance at which a 20 Fast Cable 0.03 0.9 55.33 3,320 transmitter and receiver can successfully Mbps operate along a link. 100 Mbps 100 0.007 0.18 11.07 664 Local Access and Transport Area (LATA): One of Fiber Mbps 196 local geographical areas in the US 1 Gbps 0.0008 0.018 1.11 66 1 Gbps created by the Modified Final Judgment in Fiber which a divested Regional Bell Operating Metropolitan Optical Ethernet (MOE): Company (RBOC) was permitted to offer local CenturyLink’s branding for fiber to the exchange telecommunications and local premises. exchange access services. Microwave: Microwave transmission refers to Local Exchange Carrier (LEC): A regulatory term the technique of transmitting information in telecommunications for a local telephone over microwave frequencies using various company. integrated wireless technologies. Local Technology Planning Team (LTPT): A Microwaves are short wavelength high regional group with the purpose of planning frequency signals that occupy the and improving broadband. electromagnetic spectrum 1 GHz to roughly Long Term Evolution (LTE): A high performance 300 GHz. This is above the radio frequency air interface for cellular mobile range and below the infrared range. communication systems. LTE technology Microwave transmissions can travel a long increases the capacity and speed of wireless distance but must be line of sight networks relative to 3G deployments. Middle Mile: Middle mile is a term most often LTE: See Long Term Evolution. referring to the network connection between the last mile and the greater Internet. LTPT: See Local Technology Planning Team. Middle mile infrastructure is sometimes Mbps: See Megabit per Second. referred to as backhaul. MDU: See Multiple Dwelling Unit. MIMO: See Multiple Input Multiple Output. Megabit per Second (Mbps): A measurement of Mobile Switching Center (MSC): The mobile data connectivity speed. Kbps < Mbps < switching center connects the landline public Gbps. switched telephone network (PSTN) system As a comparison, a high definition movie with to the wireless communications system. The surround sound is about 8.3 GB in size. To MSC is typically split into a mobile switching download this size file with different center server and a media gateway and technology transmission speeds: incorporates the bearer independent call Or Or Or control. Days Hours Minutes Seconds

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Mobile Wireless: Data connectivity from a household and business location in the U.S. cellular network. The initial target is an actual download speed MOE: See Metropolitan Optical Ethernet. of at least 4 Mbps and an upload speed of at least 1 Mbps, with a proposed review and MPLS: See Multiprotocol Label Switching. update every four years. MSC: See Mobile Switching Center. National Broadband Plan: A Federal MSO: See Multi-System Operator. Communications Commission plan to MTFB: See Mean Time Between Failures. improve Internet access in the United States. MTU: See Multiple Tenant Unit. National Telecommunications and Information Administration (NTIA): A division of the Multi-System Operator (MSO): Typically refers Department of Commerce. to a firm that owns more than one cable television network infrastructure. NATOA: See National Association of Telecommunications Officers and Advisors. Multiple Dwelling Unit (MDU): A building or property with multiple individual residential Natural Monopoly: A monopoly in an industry addresses like an apartment building. in which it is most efficient (involving the lowest long-run average cost) for production Multiple Input Multiple Output (MIMO): An to be concentrated in a single firm. antenna technology for wireless communications in which multiple antennas Network Management System (NMS): A are used at both the source (transmitter) and combination of hardware and software used the destination (receiver). The antennas at to monitor and administer a computer each end of the communications circuit are network or networks. Individual network combined to minimize errors and optimize elements in a network are managed by an data speed. element management system. Multiple Tenant Unit (MTU): A building or Network Operations and Dispatch Center property with multiple individual business (NODC): When a network operations center addresses like a strip mall or office building. also has crew dispatch functions it is sometimes called a network operations and Multiprotocol Label Switching (MPLS): A dispatch center. mechanism in high-performance telecommunications networks which directs Network Operations Center (NOC): The and carries data from one network node to centralized location where the network is the next. MPLS makes it easy to create monitored and restoration, maintenance, "virtual links" between distant nodes. It can and operations are coordinated. encapsulate packets of various network Network Owner: An organization owning (and protocols. possibly operating) telecommunications National Association of Telecommunications infrastructure. Officers and Advisors (NATOA): NATOA is NMS: See Network Management System. comprised of local government officials and NOC: See Network Operations Center. employees that work on cable and broadband issues – from public access NODC: See Network Operations and Dispatch television to managing the community’s Center. rights of way. Node: An active or passive element in a cable or National Broadband Availability Target: The telephone system where neighborhood level of service set in the National Broadband distribution (or access level infrastructure) Plan that should be available to every begins. Often a node is where fiber

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transitions to copper local loop infrastructure. Node Splitting: In a cable system, adding infrastructure so that subscribers previously served by a single node are moved to multiple nodes reducing the number of subscribers per node. NTIA: See National Telecommunications and Information Administration. OECD: See Organization for Economic Cooperation and Development. OFAP: See Optimal Fiber Allocation Plan. ONT: See Optical Network Termination. Open Access Network: A network designed and operated on the principal of a wholesale/retail split in which the network owner makes wholesale infrastructure and services available to competing service providers who provide retail services to end customers. Open Systems Interconnect (OSI): The ISO model that defines the seven layers of activity in a data communication network.

Operational Expense (OpEx): An expense a business incurs over the course of its normal operations. Examples include product overhead, employee salaries and electric bill payments. Importantly, operating expenses on a balance sheet reflect only ordinary expenses rather than unexpected, one-time expenses. One subtracts the operating expense from operating revenue to determine the operating profit. OpEx: See Operational Expense. Optical Network Termination (ONT): The device in a PON architecture that terminates the optical network at the customer’s

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premises. In many active architectures the Overbuild: The process of deploying a network parallel device is called an AP or EDD} in an already developed area – usually where Optimal Fiber Allocation Plan (OFAP): In existing telecommunications networks designing a fiber network, engineers must already exist. take into consideration the cost of Overlash: The process of adding additional aggregation points vs. the cost of the fiber cable to an existing aerial route. plant itself. The OFAP describes the balance P2P: See Peer to Peer. point where the greatest efficiency in both aggregation and fiber plant is achieved. PARCC: See Partnership for Assessment of Readiness for College and Careers. Organization for Economic Cooperation and Development (OECD): The mission of the Partnership for Assessment of Readiness for OECD is to promote policies that will improve College and Careers (PARCC): An the economic and social well-being of people organization that creates a standard set of K- around the world. 12 assessments in math and English. The 30 member countries are: Australia, Passive Optical Network (PON): A fiber Austria, Belgium, Canada, Czech Republic, architecture that shares bandwidth with Denmark, Finland, France, Germany, Greece, multiple subscribers through passive Hungary, Iceland, Ireland, Italy, Japan, Korea, splitters. Luxembourg, Mexico, the Netherlands, New PBX: See Private Branch Exchange. Zealand, Norway, Poland, Portugal, Slovak PCS: See Personal Communications Service. Republic, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United Peer to Peer: A type of network or service that States. allows computers to connect directly to each other rather than organizing them via OSI: See Open Systems Interconnect. hierarchical connections. OSP: See Outside Plant. Peering: A relationship between two or more OTT: See Over the Top. ISPs in which the ISPs create a direct link Outside Plant (OSP): The outside plant is that between each other and agree to forward portion of the physical network that delivers each other's packets directly across this link. services to the subscribers' homes that lies Peering Point: A physical location where between the CO or node and the premises peering occurs. demarcation. Outside plant consists of PEG: See Public Access, Education, and conduit, fiber, cable, handholes, Government. communications shelters, and other elements. Personal Communications Service (PCS): The FCC term used to describe a set of 2G mobile Outside Plant System of Record: The outside communications digital cellular technologies plant system of record is any system used as working over CDMA, GSM, and TDMA air the definitive record of the outside plant. interfaces Over Subscription Rate: The ratio of retail Plain Old Telephone Service (POTS): The basic bandwidth to wholesale bandwidth used by single line switched access service offered by and ISP to manage bandwidth costs. local exchange carriers to residential and Over the Top: Services carried over an Internet business end users, using loop-start signaling. connection. For example, OTT video would Point of Presence (PoP): A physical location include video delivered by Hulu or YouTube. where one network hands off to another.

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PON: See Passive Optical Network. operations that has a proposed wavelength PoP: See Point of Presence. plan compatible with data PON solutions including EPON and 10G-EPON. POTS: See Plain Old Telephone Service. RBOC: See Regional Bell Operating Company. Primary Revenue: Revenue created from direct charges. Regional Bell Operating Company (RBOC): Local exchange carriers formed after the Private Branch Exchange (PBX): A telephone breakup of AT&T in 1984. The seven regional system within an enterprise that switches holding companies (RHCs) of roughly equal calls between enterprise users on local lines size were formed as a result of the 1982 while allowing all users to share a certain Consent Decree AT&T signed with the US number of external phone lines. Department of Justice, stipulating that it PSTN: See Public Switched Telephone Network. would divest itself of its 22 wholly owned Public Access, Education, and Government telephone operating companies. The seven (PEG): These are commonly programming RHCs were Ameritech, Bell Atlantic, options made available to the community by BellSouth, NYNEX, Pacific Telesis, the cable company as part of its franchise Southwestern Bell and US West. After a agreement. series of acquisitions, mergers and name changes (including one in which a Public Switched Telephone Network (PSTN): combination of several RHCs reclaimed the The worldwide collection of interconnected original AT&T name), only three of the public telephone networks that was designed original seven remain. They are AT&T, primarily for voice traffic. The PSTN is a CenturyLink, and Verizon. circuit-switched network, in which a dedicated circuit (also referred to as a Regional Tandem: A tandem switch is an channel) is established for the duration of a intermediate switch or connection between transmission, such as a telephone call. This an originating telephone call or location and contrasts with packet switching networks, in the final destination of the call. These are which messages are divided into small hub facilities that interconnect telephone segments called packets and each packet is central office exchanges and are deployed by sent individually. Packet switching networks geographical region within a telco LATA or were initially designed primarily for data exchange. traffic. RFoG: See Radio Frequency Over Glass. QOS: See Quality of Service. Right of Way (ROW): The legal right, Quadruple Play: A triple play with cell phone established by usage or grant, to pass along a service. Sometimes called a “Grand Slam”. specific route through grounds or property belonging to another. Quality of Service (QOS): The ability to provide different priority to different applications, ROW: See Right of Way. users, or data flows, or to guarantee a certain Rural Utilities Service (RUS): A division of the level of performance to a data flow in a data US Department of Agriculture. RUS has a network. division responsible for providing low Radio Frequency Over Glass (RFoG): An interest loans to telecommunications evolutionary technology that allows cable network owners to deploy broadband companies to offer an all-fiber architecture technologies in rural areas. (not hybrid-fiber coax) without changing RUS: See Rural Utilities Service. modulation schemes. RFoG is a standard in SCAN: See Southwest Colorado Access Network. development for Point to Multipoint (P2MP)

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SDV: See Switched Digital Video. Spectrum Allocation: The amount of spectrum Second Mile: Generally refers to the transport dedicated (or allocated) to a specific use. In and transmission of data communications wireless, spectrum allocation is typically from the first point of aggregation to the made in paired bands with one band for greater Internet or the peering point. upstream and the other for downstream. Sometimes called middle mile or backhaul. SSB: See Subscriber Splice Box. Secondary Revenue: Revenue generated State and Local Implementation Grant Program through taxes or fees unrelated to the (SLIGP): The Middle Class Tax Relief and Job primary purpose of the assets. Creation Act of 2012 authorized the creation Selling, General and Administrative Expense of the first nationwide broadband network (SG&A): Corporate overhead costs, including for public safety, the First Responder expenses such as marketing, advertising, Network Authority (FirstNet). The law also salaries and rent. SG&A is found on a directed NTIA to develop a grant program for corporate income statement as a deduction states to support planning, education and from revenues in calculating operating outreach as they consult with FirstNet on the income. deployment of the broadband network, which will enable first responders to better Service Area: An area served by a community communicate during emergencies and save cabinet. lives. NTIA’s State and Local Implementation Service Provider: An organization providing Grant Program gives states the resources telecommunications or broadband services. needed to consult with FirstNet on Set Top Box (STB): The device used to translate deployment of a nationwide public safety IPTV or other digital television signals to broadband network. useful information to the customer’s STB: See Set Top Box. television. Subscriber Splice Box (SSB): The splice location SG&A: See Selling, General and Administrative where a subscriber’s drop level infrastructure Expense. enters the network. May also be called a Signal to Interface plus Noise Ration (SINR): customer access point (CAP). For a wireless communications device, the Switched Digital Video (SDV): A network ratio of the received strength of the desired scheme for distributing digital video via a signal to the received strength of undesirable cable more efficiently to free up bandwidth signals (noise and interference). for other uses. Only channels being watched SIM: See Subscriber Identity Module. by end users in a given node are transmitted to that node. SINR: See Signal to Interface plus Noise Ratio. Symmetrical: Internet connections have two SIPA: See State Internet Portal Authority. components - a downstream and upstream. SLIGP: See State and Local Implementation When the two speeds are comparable, the Grant Program. connection is termed symmetric. Fiber-optic Southwest Colorado Access Network (SCAN): networks more readily offer symmetrical An effort undertaken by the Southwest connections than DSL and cable, which are Colorado Council of Governments to improve inherently asymmetrical. Ultimately, purely broadband by building local distribution symmetrical connections are less important rings. than connections which offer robust connections in both directions. However, many asymmetrical connections via DSL and

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cable networks offer upload speeds that are networks (typically Tier 2 networks) to reach too slow to take advantage of modern the Internet. applications. Time Division Multiple Access (TDMA): T1: A mode of frequency division multiplexing Technology used in digital cellular telephone that provides 1.544 Mbps or 24 voice communication that divides each cellular channels. Sometimes called DS1. channel into three time slots in order to TA: See Terminal Adapter. increase the amount of data that can be carried. TDMA is used by Digital-American Take Rate: Represents the number of Mobile Phone Service (D-AMPS), Global subscribers divided by the number of System for Mobile communications (GSM), potential subscribers. There are several and Personal Digital Cellular (PDC). Each of different models for defining both these systems implements TDMA in subscribers and potential subscribers. somewhat different and potentially TCP/IP: See Transmission Control incompatible ways. An alternative Protocol/Internet Protocol. multiplexing scheme to FDMA with TDMA is TDM: See Time Division Multiplexing. CDMA (code division multiple access), which takes the entire allocated frequency range TDMA: See Time Division Multiple Access. for a given service and multiplexes Telco: Telephone Company. A provider of information for all users across the spectrum telecommunications services such as voice range at the same time. and data services. Also called common Triple Play: The three main services offered carriers or Local Exchange Carriers. over modern broadband networks - Telecommunication Act of 1996: Current US television, phone services, and Internet federal law governing telecommunications access - comprise the triple play. Many regulation. consumers like to get all three from the same Telepresence: Refers to a variety of methods to service provider on the same bill. Service use technology to make it seem like a person providers frequently offer deals that will in a remote location is present. The more lower the cost on these packages. bandwidth available, the more realistic the UMTS: See Universal Mobile telepresence. Telecommunications System. Terminal Adapter (TA): The CPE device used to Uninterruptable Power Supply (UPS): A batter convert VOIP signals to traditional telephone device that continues to deliver power to signals so customers do not require connected electronics when other power specialized telephones. fails. Tier 1 Network: An Internet Protocol network United States Department of Agriculture that participates in the Internet solely via (USDA): See settlement-free interconnection, also known http://www.usda.gov/wps/portal/usda/usda as settlement-free peering. home. Tier 2 Network: An Internet service provider Universal Mobile Telecommunications Service who engages in the practice of peering with (UMTS): Third-generation (3G) broadband, other networks, but who still purchases IP packet-based transmission of text, digitized transit to reach some portion of the Internet. voice, video and multimedia at data rates up Tier 3 Network: Used to describe networks who to and possibly higher than 2 Mbps, offering solely purchase IP transit from other a consistent set of services to mobile computer and phone users. Based on the

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Global System for Mobile (GSM) Internet access is available at downstream communication standard. speeds between 15 and 300 megabits per Universal Service Fund (USF): A federal second ( Mbps ) and upstream speeds program funded by telecommunications between 5 and 65 Mbps. surcharges with four programs: high cost Verizon has built its FiOS network in most of (subsidizes the high cost of services in rural the states where it offers landline areas), low income (includes Lifeline and Link communications services. Up discounts to those in poverty), rural Virtual Local Area Network (VLAN): A method health care (reduced rates to rural health of using common carrier networks to include care providers to ensure they have access to disparate devices on the same broadcast similar services as urban counterparts), and domain. schools and libraries (E-Rate subsidizes Virtual Private Network (VPN): A set of telecommunication services to schools and protocols used to build and secure a private libraries). connection through a public network. Unserved: Those addresses without access to a VLAN: See Virtual Local Area Network. broadband network capable of offering service that meets the National Broadband Voice Over Internet Protocol (VOIP): A method Availability Target. of delivering voice services over an IP (packet switched) network. Upload: Internet connections have two components - a download and upload. VOIP: See Voice Over Internet Protocol. Upload refers to the rate at which the user's VPN: See Virtual Private Network. computer can send data to the Internet. DSL Wholesale Retail Split: One description of the and cable networks frequently offer upload telecommunications business model wherein speeds at only 1/10 of the download speeds. the network owner and the retail service This is one of the main reasons DSL and cable provider are not the same entity. networks are insufficient for the modern Wi-Fi: Wi-Fi is a suite of protocols that allow Internet. wireless devices to exchange information UPS: See Uninterruptable Power Supply. using unlicensed frequencies. Equipment Upstream: Generic term referring to traffic carrying the Wi-Fi brand is interoperable. going from the subscriber location towards Recently, a number of cities and some the network core. private companies attempted to blanket their cities with Wi-Fi but the technology is USDA: See United States Department of not well suited to such large scale efforts. Agriculture. Wi-Fi has proved tremendously successful in USF: See Universal Service Fund. homes and businesses. Unbundle: The process of making network WiMax: Worldwide Interoperability for elements available to competing service Microwave Access (WiMAX) is a providers. telecommunications technology that uses U-Verse: see AT&T U-Verse. radio spectrum to transmit bandwidth Verizon Fiber Optic System (FiOS): FiOS (Fiber between digital devices. Similar to WiFi, Optic Service) is a "fiber to the home" (FTTH), WiMAX brings with it the ability to transmit implementation undertaken by Verizon. A over far greater distances and to handle typical FiOS package includes high-speed much more data. Internet access along with cable TV and basic Wireless: Unwired telecommunications; either telephone service. For consumer use, FiOS fixed wireless or mobile wireless.

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Wireless Internet Service Provider (WISP): An areas and areas in and around smaller cities Internet service provider that provides fixed and towns. or mobile wireless services to its customers. WISP: See Wireless Internet Service Provider. Using Wi-Fi or proprietary wireless methods, WISPs provide last mile access, often in rural

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Form of City of San Pablo Consultant Contract

Attached

City of San Pablo 17 Request for Proposals for Municipal Broadband Engineering

AGREEMENT FOR ARCHITECTURAL CONSULTING SERVICES BETWEEN THE CITY OF SAN PABLO AND ______Project No.______Agreement No. [_____]

THIS AGREEMENT, dated this ____ day of ______, 20__, is by and between the City of San Pablo, a municipal corporation organized and existing under the laws of the State of California, (hereinafter referred to as "City "), whose address is 13831 San Pablo Ave., San Pablo, California 94806, and ______, (hereinafter referred to as "Consultant"), whose address is ______, Telephone _____, for ______services.

RECITALS:

WHEREAS, the City desires to contract with ______who will provide architectural and engineering services for the new San Pablo Library;

WHEREAS, Consultant desires to enter into the agreement described herein with the City as an independent contractor;

WHEREAS, Consultant has represented to City, and does in fact have the special training, skill, competence and expertise necessary to provide architectural and engineering services contemplated herein;

WHEREAS, the City desires to engage a professional who will act at all times with the City’s best interest in mind and who will respect the trust and confidence placed in that professional by the City;

WHEREAS, Consultant is willing to render such professional services, as hereinafter defined, on the following terms and conditions.

NOW, THEREFORE, Consultant and the City agree as follows:

AGREEMENT:

(1) Scope of Service.

Term and Scope of Services

Consultant agrees to provide architectural and engineering services to the City in conformance with the proposal submitted by Consultant, ______, hereinafter referred to as Exhibit A, the cost proposal submitted by Consultant, dated ______, hereinafter referred to as Exhibit B, and the City’s Request for Proposal, dated ______as revised on ______, hereinafter referred to as Exhibit ___, all of which are attached and incorporated herein by reference. In the event of any discrepancy between any of the terms of Consultant’s proposal, the City’s Request for Proposal, and this agreement, the terms most favorable to the City shall prevail.

Page | 1

Consultant shall provide the scope and range of services directed to the attainment of the goals, milestones and performance commitments described in the exhibits attached hereto, including, but not limited to, the following:

Quality of Performance

Consultant agrees to perform these services in accordance with the standards of its profession and within the terms of this agreement, and shall at all times be provided on a basis satisfactory to the City Manager, and shall at a minimum be consistent with all goals and objectives set forth herein.

Consultant shall be solely responsible for the quality and suitability of services provided pursuant to this Agreement. The City Manager shall determine whether services provided by Consultant pursuant to this Agreement are satisfactory to the City. If during the course of this Agreement, it is determined services being provided are not satisfactory, Consultant shall take such corrective action as the City may require. Failure to promptly take such action shall constitute a material breach of this Agreement and cause for termination in the City’s discretion. This standard of care is not intended and shall not be construed to impose an obligation on the City within the meaning of Government Code Section 815.6.

(2) Compensation.

Notwithstanding any contrary indications which may be contained in Consultant's proposal, in exchange for the satisfactory performance of services that satisfy and timely achieve the milestones, performance commitments and outcomes identified herein and in the attached exhibits, City hereby agrees to pay Consultant a sum not to exceed ______as follows:

Consultant shall be paid within thirty (30) days of receipt of billings for work completed and approved. Invoices shall be submitted containing all information contained in paragraph 6 “Billings” below. In no event shall Consultant be entitled to compensation for extra work unless an approved change order, or other authorization describing the extra work and payment terms, has been executed by City prior to the commencement of the work.

Invoices must be signed by an authorized representative of Consultant, who shall verify that the invoiced services have been performed.

(3) Changes In Work-Extra Work. In addition to services described in section 1, the parties may from time to time agree in writing that Consultant, for additional compensation, shall perform additional services. The City and Consultant shall agree in writing to any changes in compensation and/or changes in Consultant’s services prior to the commencement of any work. If Consultant deems work it has been directed to perform is beyond the scope of this agreement and constitutes extra work, Consultant shall immediately inform the City in writing of the fact. The City shall make a determination as to whether such work is in fact beyond the scope of this agreement and constitutes extra work. In the event that the City determines that such work does constitute extra work, it shall provide compensation to the Consultant in accordance with an agreed cost that is fair and equitable.

Page | 2 This cost will be mutually agreed upon by the City and Consultant. A supplemental agreement providing for such compensation for extra work shall be negotiated between the City and the Consultant.

(4) Effective Date and Term. The effective date of this agreement is ______and it shall terminate on ______.

(5) Independent Contractor Status. It is expressly understood and agreed by both parties that Consultant, while engaged in carrying out and complying with any of the terms and conditions of this agreement, is an independent contractor and not an employee of the City. Consultant shall be fully responsible for all matters relating to the payment of its employees, including compliance with social security, withholding tax and all other laws and regulations governing such matters. Consultant shall be responsible for its own acts and those of its agents and employees during the term of this agreement. Consultant shall not represent, at any time or in any manner, that Consultant is an employee of the City. Consultant will exercise its judgment in recommending to City the methods by which to accomplish City’s objectives and desires. In any case where an opportunity is made available to Consultant, Consultant will determine whether it possesses sufficient training and background to carry out whatever objective is sought by the City. If Consultant accepts an engagement, such an acceptance is deemed an affirmative admission that Consultant possesses the necessary skills, background, and licenses to perform the needed services. Consultant acknowledges that the City will provide no training. Consultant will provide whatever tools and materials that are necessary to complete a client engagement. Consultant is free to accept, and has accepted in the past, other client engagements. Consultant is responsible for purchasing, bringing, providing, and controlling any and all equipment, tools, instruments, etc. needed for completion of the work set forth herein, as well as for maintenance and use of such equipment. It is understood that Consultant is hired on a temporary basis only, and that if the City and/or Consultant desires to continue Consultant’s services after expiration or termination of this agreement, Consultant will sign a new contract.

(6) Billings. Consultant's bills shall include the following information: a brief description of services performed, the date the services were performed, the number of hours spent and by whom, the current contract amount, amount previously billed, total paid to date, outstanding balance, current invoice amount, total amount billed against the contract, amount remaining in contract, and the consultant’s signature. Except as specifically authorized by City, Consultant shall not bill City for duplicate services performed by more than one person. In no event shall Consultant submit any billing for an amount in excess of the maximum amount of compensation provided in sections (2) and (3).

The expenses of any office, including furniture and equipment rental, supplies, salaries of employees, telephone calls, postage, advertising, and all other expenses incurred by Consultant in the performances of this agreement shall be incurred at the Consultant’s discretion. Such expenses shall be Consultant’s sole financial responsibility

(7) Advice and Status Reporting. Consultant shall provide the City with timely reports, orally or in writing, of all significant developments arising during performance of its services hereunder, and shall furnish to City such information as is necessary to enable City to monitor the performance of this Agreement, including statements and data demonstrating the effectiveness of the services provided in achieving the goals and objectives contained herein. The City may withhold payments otherwise due to Consultant pending timely delivery of all such reports and information. Consultant shall notify the City Manager of any matters that could adversely affect Consultant’s ability or

Page | 3 eligibility to continue to perform services under this Agreement, and shall do so immediately after discovery of the same.

(8) Retention of Records. Consultant’s complete files, including all records, employee time sheets, and correspondence pertaining to the work as described within the proposal of services submitted to the City shall upon request be available for review by the City, and copies of pertinent reports and correspondence, upon written request, shall be furnished for the files of City. Consultant shall maintain adequate documentation to substantiate all charges for hours and materials charged to City under this agreement. Consultant shall maintain the records and any other records related to the performance of this agreement and shall allow City access to such records for a period of four (4) years after the completion of the work to which records relate.

At City’s request, or upon completion or termination of this agreement, Consultant shall return to City all plans, maps, cost estimates, project financial records, reports, and related documents.

All research information, plans, diagrams, financial records, reports, cost estimates or other documents prepared or obtained under the terms of this agreement shall be delivered to and become the property of the City and all data prepared or obtained under this contract shall be made available, upon request, to the City without restrictions or limitations on their use.

Consultant and its subcontractors shall maintain all books, documents, papers, employees’ time sheets, accounting records, and other evidence pertaining to cost incurred and shall make such materials available at their respective offices at all reasonable times during the contract period and for four (4) years from the date of final payment under the contract, for inspection by the City, State, F.H.W.A, and/or any authorized representatives of the Federal Government and copies thereof shall be furnished if requested. Consultant also agrees to submit all records, books, documents, and related material for audit evaluation by the City, State, F.H.W.A., or authorized representatives prior to, during, or four (4) years following this Project for the purpose of ascertaining applicable overhead rates, book, and record keeping procedures and other information as necessary.

(9) Written Reports and Documents. In accordance with Government Code section 7550, any document or written report prepared by Consultant for or under the direction of City shall contain the numbers and dollar amounts of all contracts and subcontracts relating to the preparation of such document or written report; provided, however, that the total cost for work performed exceeds five thousand dollars ($5,000). The contract and subcontract numbers and dollar amounts shall be contained in a separate section of such document or written report. When multiple documents or reports are the subject or product of this agreement, the disclosure section may also contain a statement indicating that the total contract amount represents compensation for multiple documents or reports.

(10) Record and Fiscal Control System

Consultant shall maintain its financial records and fiscal control systems in a manner that meets the approval of the City; it shall maintain personnel and payroll records to adequately identify the source and application of all received funds; withhold income taxes; pay employment (social security), unemployment compensation, worker's compensation and other taxes as may be due; and unless exempt, procure and maintain a City of San Pablo Business License. Consultant shall maintain an

Page | 4 effective system of internal control to assure that funds provided through the City are used solely for authorized purposes.

(11) Access to Records; Audits

The City shall have access at any time during normal business hours and as often as necessary to any bank account and books, records, documents, accounts, files, reports, and other property and papers of Consultant relating to the services to be provided under this Agreement for the purpose of making an audit, review, survey, examination, excerpt or transcript.

(12) Consultant’s Testimony. Consultant agrees to consult with City and testify at City’s request at no additional cost other than normal witness fees if litigation is brought against City in connection with Consultant’s services.

(13) Designation of Primary Provider of Services. This agreement contemplates the services of Consultant firm, ______. The primary provider of the services called for by this agreement shall be______, who shall not be replaced without the written consent of City

(14) Assignment of Personnel. Consultant shall assign only competent personnel to perform services pursuant to this agreement. If City asks Consultant to remove a person assigned to the work called for under this agreement, Consultant agrees to do so immediately regardless of the reason, or the lack of a reason, for City's request.

(15) Assignment and Subcontracting. It is recognized by the parties that a substantial inducement to City for entering into this agreement was, and is, the reputation and competence of Consultant. The assignment of this Agreement by Consultant, or any interest therein, is prohibited without the prior written approval of City's City Manager. Consultant shall not subcontract any portion of the performance contemplated and provided for herein without prior written approval of the City's City Manager.

(16) Insurance.

A. General, Automotive, and Employer’s Liability, and Workers’ Compensation Provisions. On or before beginning any of the services or work called for by any term of this agreement, Consultant, at its own cost and expense, shall carry, maintain for the duration of the agreement, and provide proof thereof that is acceptable to the City the insurance specified herein below with insurers and under forms of insurance satisfactory in all respects to the City. Consultant shall not allow any subcontractor to commence work on any subcontract until all insurance required of the Consultant has also been obtained for the subcontractor. Consultants shall maintain limits no less than set forth below. If the consultant maintains higher limits than the minimums shown above, the City shall be entitled to coverage for the higher limits maintained by the consultant.

1. General Liability: $2,000,000 (Includes operations, products and completed operations.)

Per occurrence for bodily injury, personal injury, and property damage.

2. Automotive Liability: $1,000,000 Page | 5

Per accident for bodily injury and property damage

3. Workers’ Compensation: As Required by the State of California. The Workers’ Compensation policy shall be endorsed with a waiver of subrogation in favor of the City for all work performed by the Consultant, its employees, agents and subcontractors.

4. Employers’ Liability: $1,000,000 each accident;

$1,000,000 policy limit bodily injury by disease, $1,000,000 each employee bodily injury by disease.

5. Deductibles and Self-Insured Retentions

Any deductibles or self-insured retentions must be declared to and approved by City. At the option of City, either the insurer shall reduce or eliminate such deductibles or self-insured retentions as respects the City, its officers, officials, employees and volunteers; or the Consultant shall provide a financial guarantee satisfactory to the City guaranteeing payment of losses and related investigations, claim administration, and defense expenses.

6. Other Insurance Provisions

The General Liability and Automobile Liability policies are to contain, or be endorsed to contain, the following provisions:

 The City, its officers, officials, employees, and volunteers are to be covered as insureds with respect to liability arising out of automobiles owned, leased, hired or borrowed by or on behalf of the Consultant; and with respect to liability arising out of work or operations performed by or on behalf of the Consultant including materials, parts or equipment furnished in connection with such work or operations. General Liability coverage shall be provided in the form of an Additional Insured endorsement (form CG 20 10 11 85, or forms CG2010 version 10/01 and GC 2037 versions 10/01 or equivalent) to the Consultant’s insurance policy, or as a separate owner’s policy.

 For any claims related to this project, the Consultant’s insurance coverage shall be primary insurance as respects the City, its officers, officials, employees, and volunteers. Any insurance or self-insurance maintained by the City, its officers, officials, employees, or volunteers shall be excess of the Consultant’s insurance and shall not contribute with it.

 Each insurance policy required by this clause shall be endorsed to state that coverage shall not be canceled by either party, except after thirty (30) days prior written notice has been provided to the City.

 Each of the following shall be included in the insurance coverage or added as an endorsement to the policy:

(i) City, its officers, employees, agents, and volunteers are to be covered as insureds as respects each of the following: liability arising out of activities performed by or on Page | 6 behalf of Consultant, including the insured's general supervision of Consultant; products and completed operations of Consultant; premises owned, occupied or used by Consultant; or automobiles owned, leased, hired, or borrowed by Consultant. The coverage shall contain no special limitations on the scope of protection afforded to City, its officers, employees, agents, or volunteers.

(ii) The insurance shall cover on an occurrence or an accident basis, and not on a claims-made basis.

(iii) An endorsement must state that coverage is primary insurance and that no other insurance affected by the City will be called upon to contribute to a loss under the coverage.

(iv) Any failure of Consultant to comply with reporting provisions of the policy shall not affect coverage provided to City and its officers, employees, agents, and volunteers.

(vi) Notice of cancellation or non-renewal must be received by City at least thirty days prior to such change.

Deductibles and Self-Insured Retentions. Consultant shall disclose the self-insured retentions and deductibles before beginning any of the services or work called for by any term of this agreement. During the period covered by this agreement, upon express written authorization of City Manager, Consultant may increase such deductibles or self-insured retentions with respect to City, its officers, employees, agents, and volunteers. The City Manager may condition approval of an increase in deductible or self-insured retention levels upon a requirement that Consultant procure a bond guaranteeing payment of losses and related investigations, claim administration, and defense expenses that is satisfactory in all respects to each of them.

Notice of Reduction in Coverage. In the event that any coverage required under this section of the agreement is reduced, limited, or materially affected in any other manner, Consultant shall provide written notice to City at Consultant's earliest possible opportunity and in no case later than five days after Consultant is notified of the change in coverage.

7. Waiver of Subrogation.

Consultant hereby agrees to waive subrogation which any insurer of Consultant may acquire from Consultant by virtue of the payment of any loss. Consultant agrees to obtain any endorsement that may be necessary to effect this waiver of subrogation.

8. Acceptability of Insurers

Insurance is to be placed with insurers with a current A.M. Best rating of no less than A:VII unless otherwise acceptable to the Entity. Exception may be made for the State Compensation Insurance Fund when not specifically rated.

9. Verification of Coverage

Page | 7 Consultant shall furnish the City with endorsements effecting coverage required by this clause. The endorsements are to be signed by a person authorized by that Insurer to bind coverage on its behalf. The endorsements are to be on forms provided by the city, unless the insurance company will not use the City’s forms. All endorsements are to be received and approved by the City before work commences. However, failure to do so shall not operate as a waiver of these insurance requirements. As an alternative to the City’s forms, the Consultant’s insurer may provide complete copies of all required insurance policies, including endorsements effecting the coverage required by the specifications.

10. Subcontractors

Consultant shall require and verify that all subcontractors maintain insurance meeting all the requirements stated herein.

B. Professional Liability. Consultant, at Consultant's own cost and expense, shall maintain for the period covered by this agreement professional liability insurance for licensed professionals performing work pursuant to this agreement in an amount not less than one (1) million dollars covering the licensed professionals' errors and omissions, as follows:

(i) Any deductible or self-insured retention shall not exceed $50,000 per claim.

(ii) Notice that cancellation, material change, or non-renewal must be received by the City at least thirty days prior to such change shall be included in the coverage or added as an endorsement to the policy.

(iii) The following provisions shall apply if the professional liability coverages are written on a claims-made form:

1. The retroactive date of the policy must be shown and must be before the date of the agreement.

2. Insurance must be maintained and evidence of insurance must be provided for at least five years after completion of the agreement or the work.

3. If coverage is canceled or not renewed and it is not replaced with another claims- made policy form with a retroactive date that precedes the date of this agreement, Consultant must provide extended reporting coverage for a minimum of five years after completion of the agreement or the work. The City shall have the right to exercise at the Consultant's cost, any extended reporting provisions of the policy should the Consultant cancel or not renew the coverage.

4. A copy of the claim reporting requirements must be submitted to the City prior to the commencement of any work under this agreement.

Page | 8 C. City Remedies. In addition to any other remedies City may have if Consultant fails to provide or maintain any insurance policies or policy endorsements to the extent and within the time herein required, City may, at its sole option:

(i) Obtain such insurance and deduct and retain the amount of the premiums for such insurance from any sums due under the agreement;

(ii) Order Consultant to stop work under this agreement or withhold any payment which becomes due to Consultant hereunder, or both stop work and withhold any payment, until Consultant demonstrates compliance with the requirements hereof;

(iii) Terminate this agreement.

Exercise of any of the above remedies, however, is an alternative to other remedies City may have and is not the exclusive remedy for Consultant's breach.

(17) Standard of Care. It is understood and agreed that Consultant has the professional skills, experience, and knowledge necessary to perform the work agreed to be performed under this agreement, that City relies upon the professional skills of Consultant to do and perform Consultant's work in a skillful and professional manner consistent with the standard of care of the of the industry, and Consultant thus agrees to so perform the work. Acceptance by City of the work performed under this agreement does not operate as a release of said Consultant from such professional responsibility for the work performed. It is further understood and agreed that Consultant is apprised of the scope of the work to be performed under this agreement and Consultant agrees that said work can and shall be performed in a manner consistent with the standards of the profession. This standard of care is not intended and shall not be construed to impose an obligation on the City within the meaning of Government Code Section 815.6.

(18) Indemnification for Specified Licensed Professionals

A. To the fullest extent permitted by law, the Consultant shall (1) immediately defend and (2) indemnify the City, and its directors, officers, and employees from and against all liabilities regardless of nature or type that arise out of, pertain to, or relate to the negligence, recklessness, or willful misconduct of the Consultant, or its employees, agents, or subcontractors. Liabilities subject to the duties to defend and indemnify include, without limitation, all claims, losses, damages, penalties, fines, and judgments; associated investigation and administrative expenses; defense costs, including but not limited to reasonable attorneys’ fees; court costs; and costs of alternative dispute resolution. The Consultant’s obligation to indemnify applies unless it is finally adjudicated that the liability was caused by the sole active negligence or sole willful misconduct of an indemnified party. If it is finally adjudicated that liability is caused by the comparative active negligence or willful misconduct of an indemnified party, then Consultant’s indemnification obligation shall be reduced in proportion to the established comparative liability.

B. The duty to defend is a separate and distinct obligation from Consultant’s duty to indemnify. Consultant shall be obligated to defend, in all legal, equitable, administrative, or special proceedings, with counsel approved by the City, the City and its directors, officers, and employees, immediately upon tender to Consultant of the claim in any form or at any stage of an action or proceeding, whether or not liability is established. An allegation or determination that persons other Page | 9 than Consultant are responsible for the claim does not relieve Consultant from its separate and distinct obligation to defend under this section. The obligation to defend extends through final judgment, including exhaustion of any appeals. The defense obligation includes an obligation to provide independent defense counsel if Consultant asserts that liability is caused in whole or in part by the negligence or willful misconduct of the indemnified party. If it is finally adjudicated that liability was caused by the comparative active negligence or willful misconduct of an indemnified party, Consultant may submit a claim to the City for reimbursement of reasonable attorneys’ fees and defense costs in proportion to the established comparative liability of the indemnified party.

C. The review, acceptance or approval of the Consultant’s work or work product by any indemnified party shall not affect, relieve or reduce the Consultant’s indemnification or defense obligations. This Section survives completion of the services or the termination of this contract. The provisions of this Section are not limited by and do not affect the provisions of this contract relating to insurance.

(19) Licenses. If a license of any kind, which term is intended to include evidence of registration, is required of Consultant, its employees, agents, or subcontractors by federal or state law, Consultant warrants that such license has been obtained, is valid and in good standing, and Consultant shall keep it in effect at all times during the term of this agreement, and that any applicable bond has been posted in accordance with all applicable laws and regulations.

Consultant shall obtain and maintain a City of San Pablo Business License until all contract services are rendered and accepted by the City.

(20) Nondiscriminatory Employment Practices and Compliance With Law.

Consultant represents that it is an Equal Opportunity Employer and shall comply with applicable regulations governing equal opportunity employment. Consultant shall not discriminate in the employment of any person because of race, color, national origin, ancestry, physical or mental disability, medical condition, marital status, sex, age, unless based upon a bona fide occupational qualification pursuant to the California Fair Employment and Housing Act. Consultant shall comply with all applicable provisions of the Americans with Disabilities Act of 1990 (ADA) in performing its obligations under this Agreement. Failure to comply with the provisions of the ADA shall be a material breach of, and grounds for the immediate termination of, this Agreement. In performing work and providing services under this Agreement, Consultant shall, at its sole cost and expense, comply with all applicable laws of the United States and the State of California; the Ordinances of the City of San Pablo; and the rules, regulations, orders and directories of their respective administrative agencies and the officers thereof.

(21) Termination.

A. City may terminate this agreement at its sole discretion at any time prior to completion by the Consultant of the services required hereunder. Notice of termination of this agreement shall be given in writing to the Consultant, and shall be sufficient and complete when same is deposited in the United States Mail, postage prepaid and certified, address as set forth in the first paragraph of this agreement. The agreement shall be terminated upon receipt of the Notice of Termination by the Consultant. If the City should terminate this agreement, the Consultant shall be compensated for all work performed prior to the time of receipt of cancellation notice, and shall be compensated for Page | 10 materials ordered by the Consultant or his employees, or services of others ordered by the Consultant or his employees, prior to receipt of notice of cancellation whether or not such materials or final instruments of services of others have actually been delivered, provided that the Consultant or his employees are not able to cancel such orders for materials or services of others. Compensation for the Consultant in the event of cancellation shall be determined by City in accordance with percentage of project completed and agreed to by the Consultant. In the event of cancellation, all notes, sketches, computations, drawings, and specifications or other data, whether complete or not, remain the property of the Consultant. The City may, at its own expense, make copies or extract information from any such notes, sketches, computations, drawings, and specifications, or other data whether complete or not.

B. Termination for Cause. City may terminate this agreement for cause by providing Consultant with one day’s written notice of such termination should Consultant violate any of the terms and conditions of this agreement. In City’s discretion and at City’s option, such termination for cause may alternatively be accomplished, where Consultant fails to perform any of the obligations required of Consultant within the time and in the manner provided for under the terms of this agreement, within seven days after receipt from the notice of such default. Upon City's termination of this agreement for cause, City reserves the right to complete the work by whatever means City deems expedient and the expense of completing such work, as well as any and all damages to the extent caused by the negligent acts, intentional acts or errors or omissions of the Consultant, shall be charged to the Consultant.

C. Immediate Termination. City may terminate this agreement immediately in any case where the Consultant engages in fraudulent or criminal activities while performing its services under this agreement, or is otherwise determined to lack the necessary skills to accomplish the desired objectives.

(22) Notices. Notices required by this agreement shall be personally delivered or mailed, postage prepaid, as follows:

To Consultant: ______

To the City: City Manager 13831 San Pablo Avenue San Pablo, CA 94806

Each party shall provide the other party with telephone and written notice of any change in address as soon as practicable.

Notices given by personal delivery shall be effective immediately. Notices given by mail shall be deemed to have been delivered forty-eight hours after having been deposited in the United States mail.

(23) Ownership of Materials. Any and all documents, including draft documents where completed documents are unavailable, or materials prepared or caused to be prepared by Consultant pursuant to this agreement shall be the property of the City at the moment of their completed preparation. All materials and records of a preliminary nature such as survey notes, sketches, Page | 11 preliminary plans, computations and other data, prepared or obtained in the performance of this agreement, shall be made available, upon request, to City at no additional charge and without restriction or limitation on their use consistent with the intent of the original design.

(24) Amendments. This agreement may be modified or amended only by a written document executed by both Consultant and City's City Manager and approved as to form by the City Attorney. Such document shall expressly state that it is intended by the parties to amend the terms and conditions of this agreement.

(25) Abandonment by Consultant. In the event the Consultant ceases performing services under this agreement or otherwise abandons the project prior to completing all of the services described in this agreement, Consultant shall, without delay, deliver to City all materials and records prepared or obtained in the performance of this agreement, and shall be paid for the reasonable value of the services performed up to the time of cessation or abandonment, less a deduction for any damages or additional expenses which City incurs as a result of such cessation or abandonment.

Consultant agrees to be financially responsible to compensate City for any costs incurred by City in retaining the services of another to replace Consultant, but only to the extent that the costs of retaining the replacement exceed what remaining amounts would have been paid to Consultant under the contract had Consultant completed the project.

(26) Waiver. The waiver by either party of a breach by the other of any provision of this agreement shall not constitute a continuing waiver or a waiver of any subsequent breach of either the same or a different provision of this agreement.

(27) No Third-Party Rights. The parties intend not to create rights in, or to grant remedies to, any third party as a beneficiary of this agreement or of any duty, covenant, obligation, or undertaking established herein.

(28) Severability. Should any part of this agreement be declared by a final decision by a court or tribunal of competent jurisdiction to be unconstitutional, invalid, or beyond the authority of either party to enter into or carry out, such decision shall not affect the validity of the remainder of this agreement, which shall continue in full force and effect, provided that the remainder of this agreement, absent the unexcised portion, can be reasonably interpreted to give effect to the intentions of the parties.

(29) Compliance with Laws. In the performance of this agreement, Consultant shall abide by and conform to any and all applicable laws of the United States, the State of California, and City ordinances. Consultant warrants that all work done under this agreement will be in compliance with all applicable safety rules, laws, statutes and practices, including but not limited to Cal/OSHA regulations.

(30) Controlling Law. This agreement and all matters relating to it shall be governed by the laws of the State of California.

(31) Breach. In the event that Consultant fails to perform any of the services described in this agreement or otherwise breaches the agreement, City shall have the right to pursue all remedies provided by law and equity. Neither payment by the City nor performance by Consultant shall be Page | 12 construed as a waiver of either party's rights or remedies against the other. Failure to require full and timely performance of any provision, at any time, shall not waive or reduce the right to insist upon complete and timely performance of such provision thereafter. Any litigation involving this Agreement or relating to the work shall be brought in Contra Costa County, and Consultant hereby waives the removal provisions of Code of Civil Procedure Section 394.

In the event of any suit, action or proceeding brought by either party for breach of any term hereof or to enforce any provision hereof, the prevailing party shall be entitled to recover its reasonable attorney’s fees.

(32) Inspection by Other Agencies. Authorized representatives of the Federal Government, the California Department of Transportation, or other government agencies which gave provided grant funding (if any) for the subject Project and the City may have the right to inspect the work of such services whenever such representatives may deem inspection to be desirable or necessary.

(33) Conflict of Interest. Consultant warrants and covenants that Consultant presently has no interest in, nor shall any interest be hereinafter acquired in, any matter which will render the services required under the provisions of this agreement a violation of any applicable state, local, or federal law. In the event that any conflict of interest should nevertheless hereinafter arise, Consultant shall promptly notify City of the existence of such conflict of interest so that the City may determine whether to terminate this agreement. Consultant further warrants its compliance with the Political Reform Act (Gov. Code ' 81000 et seq.) respecting this agreement.

Where City Manager determines, based on facts provided by city staff, that Consultant meets the criteria of section 18701 of the FPPC regulations, the individual providing services under this Agreement shall be considered a “designated employee” under the City’s conflict of interest code, and shall be required to complete FPPC Form 700 regarding his or her economic interests in a timely manner.

(34) Copyright. Upon City's request, Consultant shall execute appropriate documents to assign to the City the copyright to work created pursuant to this agreement. The issuance of a patent or copyright to Consultant or any other person shall not affect City's rights to the materials and records prepared or obtained in the performance of this agreement. City reserves a license to use such materials and records without restriction or limitation consistent with the intent of the original design, and City shall not be required to pay any additional fee or royalty for such materials or records. The license reserved by City shall continue for a period of fifty years from the date of execution of this agreement unless extended by operation of law or otherwise.

(35) Time is of the Essence. In the performance of this agreement, time is of the essence. Consultant shall be available to begin performance of services under this agreement immediately upon written notification of the execution of this agreement. All design work as outlined in the scope of services in Exhibit __ must be completed by ______.

(36) Whole Agreement. This agreement has (____) pages excluding the exhibits described on its signature page. This agreement constitutes the entire understanding and agreement of the parties. This agreement integrates all of the terms and conditions mentioned herein or incidental hereto and supersedes all negotiations or previous agreements between the parties with respect to all or any part of the subject matter hereof.

Page | 13 (37) Multiple Copies of Agreement. Multiple copies of this agreement may be executed but the parties agree that the agreement on file in the office of the City Clerk is the version of the agreement that shall take precedence should any differences exist among counterparts of the document.

IN WITNESS WHEREOF, Consultant has executed this agreement, and the City, by its City Manager, who is authorized to do so, has executed this agreement.

APPROVED AS TO FORM: CITY OF SAN PABLO A Municipal Corporation

By ______By ______Lynn Tracy Nerland, City Attorney Matt Rodriguez, City Manager

[NAME OF CONSULTANT]

By ______Consultant, [Title]

ATTEST:

By ______Dated ______Ted J. Denney, City Clerk

Attachments: Exhibit A: ______Exhibit B: ______

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